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a r t i c l e W O R K F O R M E / S P R I N G 2 0 2 2 24 H opefully you don't have whiplash from the dramatic change in infla- tion projections over the last year. Just recently, inflation was considered "transi- tory," the result of COVID-created supply chain disruptions and demand shifts to goods from services. Once the pandemic subsided, it was ex- pected that inflation would return to its pre- COVID trend of 2% or less. Unfortunately, inflation is now much more pervasive and persistent than economists predicted. It is unlikely inflation will retreat without con- sequences for households and businesses. There are three primary drivers of infla- tion: supply chain disruptions, labor short- ages and energy prices. The most likely place for improvement is the supply chain. The pandemic drove a dramatic shift toward goods (appliances, electronic, furniture, home improvement, etc.) and away from services (hotels, restaurants, travel). This shift shocked the economy and our "just in time" approach to inventory couldn't meet the COVID-induced demand shift. The good news is there is evidence that demand is returning to "normal," as anyone who has traveled recently can attest! While certain areas, such as semiconductors and energy, will remain supply constrained, supply chain issues should continue to diminish over time. The labor market continues to be very tight. Job openings remain at record highs yet the rebound in the labor participation rate remains sluggish. There are signs that individuals are grudgingly returning to the workforce, and that will help. However, the labor shortages will persist in the short-term and businesses will be required to assess their wage levels to retain and attract talent. There is no quick fix to energy inflation. Demand for fossil fuels is projected to grow for the next ten years while the supply remains well below pre-COVID production. This is a re- sult of a dramatic drop in capital expenditures by the energy industry, reduced financing of the energy industry by Wall Street, heightened government and climate regulatory burdens and, of course, the Russia-Ukraine crisis. Unfortunately, the country cannot "flip the switch" and immediately increase energy Can businesses weather the storm of inflation? B Y K E N N E T H J . E N T E N M A N N C o m m e n t a r y Kenneth J. Entenmann is chief investment officer and chief economist at NBT Wealth Management, a division of NBT Bank, which has an office in Portland. The AGC Maine Education Foundation is pleased to invest in the future of the construction industry by awarding scholarships to deserving students studying engineering and/or construction management. Since 1993, the Foundation has awarded scholarships totaling more than $250,000 to technical schools, college undergraduate students and graduate students. Currently, scholarships to 8 to 12 selected students total $20,000-$25,000 annually with individual awards ranging from $1,000 to $3,000. WORKFORCE EDUCATION From new innovative delivery methods using online training or hands-on instruction, AGC Maine offers a learning mechanism for everyone. At Maine AGC, you can expect to learn from industry leaders who apply their knowledge on the job site. They offer general courses, available to members and non-members, geared towards the industry. Their training director works with companies to create custom-tailored training, putting together the necessary components to teach neccesary skills and techniques for the industry. SCHOLARSHIPS WWW.AGCMAINE.ORG 207.622.4741 P H O T O / C O U R T E S Y O F N B T B A N K