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How daycare staffing shortages have lead to higher inflation

Lack of suitable daycare options for working parents during the pandemic have had a cascading effect on many industries, according to economic forecasters.

OLYMPIA, Wash. — Inflation is the highest it has been in 30 years but economic forecasters are anticipating it may start to go down in the new year.

Core inflation rose 3.6% in August compared to one year ago, according to CNBC.

Dr. Steve Lerch, the chief economist for the Washington State Economic and Revenue Forecast Council, said this is because of several factors caused by the coronavirus pandemic.

In April of 2020, the country and the state of Washington saw the biggest drop in employment in history leading to man business closures and layoffs. 

When things started to reopen again, a lot of businesses had a hard time, and are still having challenges finding people to hire.

With many businesses not operating at full capacity, there has been a shortage of supplies and services, which includes daycare.

"Some of the issues keeping some people out of the labor markets, for example in some cases you may have people who cannot find daycare," said Lerch. "If you can't find daycare and you've got kids, you can't go to work or if schools are shut down because of COVID."

Lerch said the pandemic has also created some real challenges for economic forecasters because of all the unknowns.

"Our forecast, and I think a lot of economists' forecasts, do show inflation starting to slow next year, the assumption there is all those sort of bottlenecks and issues I just discussed start to get resolved," he said.

"When I say we think inflation is coming down, we do believe that, but there is certainly a scenario where it stays high for longer than that," said Lerch.