Inflation Outbreak Not Likely

Of course, this is news to someone who drives a car, but the food and energy spikes of late are the consequence of either long term supply issues or short term disruptions. Both require more discussion than I care to go into right now. However, is there generalized inflation? No.

Case in point:

If you click on this graph of unit labor costs from the St. Louis Fed, you will see that we are in a very benign stage of labor cost growth. Benign is actually mild since we are only just now approaching the flat line on a year on year basis. Compare this to the 1970s or even the late 1960s. There is just about no resemblance.

Of course, the lack of wage inflation makes these energy and food price spikes just that much more damaging as those are coming right out of people's real incomes.