Will Transportation Costs Fuel Inflation?

Multiple effects are leading to higher prices in the transportation industry. Fuel costs are one determinant of transportation pricing, and oil prices have increased significantly (to around $70 per barrel). However, that is not the only cost that is rising. Another cost is labor. There is a significant shortage of truck drivers, and that is being driven by a multitude of reasons.

First, the aging boomer generation is retiring at an increasing rate. Second, millennial's tend not to want to stay away from home for extended periods of time, which is a required part of the job. Third, the job market and unemployment rate are indications of extreme competition for job applicants and people willing to enter a field where significant numbers of articles are talking about an eventual end to that line of work with self-driving trucks.

Recent on-line articles point to a lowering unemployment rate that is trending toward 0% and more jobs than job applicants. What happens to the economy when that happens? I don’t think anyone knows, because it has never happened before. I would expect wage inflation at a minimum, as companies try to lure employees away from other companies. The other effect I would expect is price inflation, because companies will have to increase prices to offset costs (in particular, labor cost increases).