(CNSNews.com) - Don't blame inflation on Washington's multi-trillion spending spree: "I think it's important to realize that the cause of this inflation is the pandemic," Treasury Secretary Janet Yellen told CBS's "Face the Nation."
"The pandemic has been calling the shots for the economy and for inflation," Yellen said in a Friday interview that aired on Sunday:
And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do. I think it's important to realize that the cause of this inflation is the pandemic.
It led to a dramatic increase in demand for products. Households were unable to spend on services, going out to eat and traveling. They shifted as they stayed at home, worked more from home. They shifted their spending on to goods. That led to a surge in the demand for products.
And although the supply of products has increased in the United States and globally, not as much as demand. Americans feel confident about the job market. Quits have increased to record numbers, which is a sign that people are getting outside offers. They're seeing wage increases.
That is something that didn't have to happen, and it really reflects the support that we gave to Americans to keep up their spending and make it through the pandemic.
But with supply disruptions and this huge shift in demand toward products, we are seeing some broad-based price increases. We have shortages of semiconductors. That's really caused new and used car prices to rise, car production to decline.
Host Margaret Brennan asked Yellen when she thinks the situation will improve:
"You know, when the economy recovers enough from COVID, the demand patterns, people go back to eating out, traveling more, spending more on services, and the demand for products, for goods begins to go back to normal," Yellen said.
"And, also, labor supply has been impacted by the pandemic. Labor force participation is down. It hasn't recovered.
"And I would expect that, if we're successful with the pandemic, to be sometime in the second half of next year, I would expect prices to go back to normal."
On a related topic, the nation's labor shortage, Yellen said the unfilled demand for workers is also the result of COVID:
The programs that were put in place, the American Rescue Plan and the CARES Act and other programs, really were intended to support households and families to get through this, so that they didn't take a huge hit to their income. So, financially, Americans say they feel good about their finances, and that's not an accident.
Unemployment is low. Labor force participation is quite depressed, relative to pre-pandemic levels. I think part of it reflects concerns about COVID and exposure to COVID, especially in jobs that involve public-facing activities. And I -- partly, the fact that child care workers, educators are in short supply creates child care problems. That also tends to suppress labor supply.
So, as I say, when we really get control of the pandemic, I think labor supply will go back to normal.