By Kris Johnson/Washington Business Association
The skyrocketing rate of inflation has turned trips to the gas station, grocery store, mall, and restaurants into nerve-wracking experiences. Not to mention the purchase of a used car or a sheet of plywood. But it’s not just wreaking havoc on family budgets – inflation is also setting alarm bells ringing for businesses.
In a recent survey of members of the Association of Washington Business, inflation emerged as the No. 1 challenge facing employers in Washington today, outpacing a long list of other concerns such as finding a sufficient numbers of workers, supply chain disruptions and overly burdensome government regulations.
This does not mean that these other concerns have disappeared. The survey of nearly 600 employers revealed that all of these issues remain major challenges, but inflation has come to the fore.
It’s easy to see why employers are worried. After years of contained inflation, inflation started to rise during the pandemic and has intensified in recent months. Consumer prices rose 8.5% in March, the fastest pace since December 1981.
The price spike is due to a combination of factors, including supply chain issues 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 fear that the Federal Reserve, in an attempt to cool the overheated market, will raise interest rates aggressively and push the economy into a slowdown. In April, Deutsche Bank was the first major bank to predict a US recession in late 2023 and into 2024.
According to the AWB survey, no employer is immune to rising inflation. Virtually all respondents – 94% – said inflation had increased their costs of doing business. And for most employers, the costs have increased dramatically. Thirty-five percent said their costs had increased by 6-10%, while almost as many (33%) said costs had increased by 11-20%. 12% said their costs had increased by 21-30% and 8% said their running costs had increased by more than 30%.
At the same time as employers are dealing with record inflation, the survey found they also continue to struggle with a host of other issues.
When asked to identify their biggest challenges, it was almost a dead end between inflation (63%), lack of skilled workers (62%) and supply chain disruption (61%). ). Government regulation (57%) and overall tax burden (51%) followed closely behind, making this the first AWB employer survey where five different issues topped 50%. This highlights just how difficult the current times are for employers.
Other issues of concern include the cost of healthcare (44% said this was a major issue), affordable housing (34%) and the cost of energy (33%). For now, the pandemic has faded as a major concern with only 15% of respondents saying it was a major challenge.
Many of these challenges are the result of complex global forces and have no easy answers. Still, it’s hard not to view the Legislature’s failure to return more of the state’s historic budget surplus of more than $14 billion during this year’s legislative session as a missed opportunity. . The legislature alone cannot fix 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 Washington Business Association, the state chamber of commerce and manufacturers association.