The new Labor Department inflation reading showed the largest year-over-year jump since August 2008, a 13-year high. In the latest report, the Consumer Price Index hit 5.4 percent, well above the 2 percent goal held by the Federal Reserve.

Does this signal the start of a brutal period of recession and economic difficulty, as it did back in 2008? Maybe not. The spike comes as the economy reopens at whiplash-inducing speed after the American consumer spent historic COVID-19 subsidies. Supply has not yet met the explosive demand.

Federal Reserve Chairman Jerome Powell said inflation is high, but it will likely ease back to normal soon.

“I will say that these effects have been larger than we expected, and they may turn out to be more persistent than we have expected,” Powell told a U.S. House subcommittee in late June. “But the incoming data are very consistent with the view that these are factors that will wane over time.”

Take lumber for one example. Prices skyrocketed as homebuilding and overall demand hit a supply chain that laid off or furloughed scores of workers in the pandemic period of low demand. The lumber industry responded and flooded the market; prices mostly equalized.

The news rattled the markets, but the S&P 500 remained just shy of record highs, which says investors aren’t all that spooked by the potential of another Great Recession.

There are plenty of other difficulties with high inflation. Record gas prices (up 45 percent year over year) keep people from traveling as much to dine out or take a road trip—another hit for struggling hotels. Food prices ticked up 2.4 percent and food away from home inflation is up more than 4 percent, far ahead of grocery. While that hasn’t scared consumers away yet, raising prices to cover higher wages or supply-chain spikes might. Then there’s the flywheel effect of inflation. As all prices rise, real wages sink. Real average hourly earnings fell 500 basis points in the face of this inflation, further disrupting the labor market.

How transitory inflation is will be something to watch closely. A new survey of consumers from the New York Federal Reserve showed consumers expect prices will rise about 4.8 percent through the year, but a Bank of America survey showed professional investors see the bump as temporary.

Few expect runaway inflation as was seen in the 1970s. Powell has reiterated time and time again this is a “unique historical event,” even though it’s dragged on longer than he thought it would.

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