The soaring inflation rate has turned trips to the gas station, grocery store, shopping mall and restaurants into nerve-wracking experiences. Not to mention buying a used car or a sheet of plywood. But it isn’t just wreaking havoc on family budgets — inflation is setting off alarm bells for businesses, too.
In a recent survey of Association of Washington Business members, inflation emerged as the No. 1 challenge facing Washington employers right now, edging out a long list of other concerns like finding enough workers, supply chain disruptions and overly burdensome government regulation.
That’s not to say those other concerns have gone away. The survey of nearly 600 employers found all of those issues remain major challenges, but inflation has leapfrogged to the front of the line.
It’s easy to see why employers are concerned. After years of restrained inflation, inflation began growing during the pandemic and has escalated in recent months. Consumer prices rose 8.5% in March, the fastest pace since December 1981.
The spiraling prices are due to a combination of factors, including supply chain snarls that began during the pandemic and have yet to be resolved. Strong consumer demand for goods and services is another factor, and Russia’s invasion of Ukraine has disrupted food and energy markets around the world.
With no end in sight, economists are warning that inflation is not only a serious threat to economic recovery but could also lead to a recession. They worry the Federal Reserve, in an attempt to cool the overheated market, will raise interest rates aggressively and push the economy into a downturn. In April, Deutsche Bank was the first major bank to forecast a U.S. recession in late 2023 and into 2024.
According to the AWB survey, no employer is immune from the rising inflation. Virtually every respondent — 94% — said inflation has increased their costs to do business. And for most employers, costs have gone up by a large amount. Thirty-five percent said their costs have risen 6-10% while almost as many (33%) said costs have risen 11-20%. Another 12% said their costs have gone up between 21-30% and 8% said their cost of doing business has gone up more than 30%.
At the same time employers are managing the record inflation, the survey found they’re continuing to struggle with a multitude of other issues, too.
When asked to identify their biggest challenges, it was nearly a dead heat between inflation (63%), a lack of qualified workers (62%) and supply chain disruption (61%). Government regulation (57%) and overall tax burden (51%) followed close behind, making this the first AWB employer survey where five different issues topped 50%. This highlights what a challenging time it is right now for employers.
Other issues generating concern include the cost of health care (44% said it’s a major issue), affordable housing (34%) and the cost of energy (33%). For the moment, the pandemic has faded as a top concern with just 15% of respondents saying it was a major challenge.
Many of these challenges are the result of complicated global forces and don’t have easy answers. Still, it’s hard not look at the Legislature’s failure to give back more of the state’s historic $14 billion-plus budget surplus during this year’s legislative session as a missed opportunity. The Legislature alone can’t solve inflation or fix the broken global supply chain, but lawmakers could have done something about taxes. They could have champions for the economy. For employers facing a myriad of challenges, it could have been one less thing to keep them up at night.
Kris Johnson is president of the Association of Washington Business, the state’s chamber of commerce and manufacturers association.