AMES, Iowa -- Steadily falling gas prices aren't showing up in lower consumer prices.
An Iowa State University economist says gas prices aren't having the same effect on inflation as are supply chain issues driven by a tight job market.
"We're still well below where we should be in terms of the number of people employed, and so the ultimate supply chain disruption in the US has been the labor market," says Professor Peter Orazem.
He says the labor market still hasn't recovered from layoffs and other cutbacks driven by the pandemic more than two years ago.
"If you have a very tight labor market, there's upward pressure on wages, and there's also upward pressure on pressure on prices because you're not producing as much as could relative to demand--and there's nothing that really has been done to change that," he says.
He also says inflation mixed with rising interest rates are pushing consumers to change spending habits...
"What's really going to abate is the demand for bigger ticket items, not for necessities but for luxury items and durable goods--things like home appliances, automobiles, and so on," Orazem says.
The US inflation rate was 8.5 percent in July, down from 9.1 percent in June--the highest rate since 1981.