a period of adjustment
A Period of Adjustment
How inflation played out in previous events may not hold cues to its behavior in the coronavirus
crisis, which is “quite di!erent” from the 2008-2009 financial crisis, Goldstein noted. “Right
now, there are big imbalances between supply and demand for various goods. On the one hand,
you have pent-up demand for cars and trips and things like that. On the other hand, because of
various frictions in the supply chain and in hiring, you see problems with supply. And [those
problems] are pushing prices up. On top of that, you have all the government and monetary
stimulus, and that can push some inflation.”
Goldstein described the current times as “a period of adjustment” on multiple fronts, including
demand and supply for goods and the prices of goods, and the labor market. The latest
employment report for April showed a gain of 266,000 jobs, much lower than what was
anticipated. He noted that some policies introduced during the pandemic, “give people incentive
not to go back to work,” such as direct cash transfers and expanded unemployment benefits.
Other factors are constraining higher employment as well: “We still don’t have full, in-person
schooling in many places, which puts constraints on parents and their flexibility to work.”
Above all, there is continuing uncertainty about the direction and pace of the pandemic. “Are we
really out of the woods and able to move forward?” Goldstein asked. “All this is still up in the air,
and you see it in various pieces of data like prices and unemployment that are extreme and
surprising in many ways.
