Over at Cumulative Model, Aaron C has been doing tremendous work keeping track of inflation/deflation risks. Today is no different, as he has charts stuffed with BEA data showing that expenses (food, rent, gas, etc) are rising as a percentage of disposable income.
Normally, workers would demand higher wages to match, but as I emailed to Aaron just now, fears of
unemployment should easily keep a lid on wage demands in the face of rising expenses. But something’s got to give — either prices fall in line with income & employment, or we double dip. Or am I missing something?
I haven’t heard back yet, but that double dip is looking perhaps as likely as not.
UPDATE: Aaron replies:
That’s my feeling. If gas gets much above the 4%, I think we’ll double dip. It’s not quite as high a share of DI as in ’08, but healthcare has put more stress on budgets.
Earlier today, David Paul Kuhn asked, “Could gas prices sink Obama’s reelection?”
Seems that way to me.