What if inflation is here to stay?

Americans are worried about inflation. This was the No. 1 economic concern expressed in a recent survey from the Pew Research Center. Some 63% say they are “very concerned" about rising prices, especially for food and consumer goods, compared with only 29% who are very concerned that Americans won’t be able to find work.

This focus on higher prices is easy to explain. Consumer inflation is running above 5%, wiping out nominal wage gains for low-income workers. The Labor Department reports that businesses investing in their long-term production capacity are facing the largest price hikes since 1982.

The official position of the Federal Reserve Board and the Biden administration is unchanged: This inflationary spurt is transitory and will abate next year to a more sustainable growth around 2%, at or near the Fed’s target. They admit that inflation has pushed higher and lasted longer than they expected but say that as the U.S. emerges from economic distortions created by the pandemic, high inflation will fade from view.

Maybe they’re right. But it’s important to consider the factors pointing in the opposite direction. Many represent structural changes in the U.S. and world economy.

The Federal Reserve pays careful attention to the public’s expectations about the future rate of inflation; these expectations shape behavior and can become self-fulfilling prophecies. The goal is to have these expectations “anchored" at around 2%. But according to the New York Fed’s August survey, consumers expect inflation to run at 5.2% in the coming year and at an average of 4% for the next three years.

Transfers to individuals during the pandemic fed a huge increase in personal savings, and this pent-up demand is bumping up against supply-side limits. Home and apartment builders, for instance, face not only a shortage of skilled workers but also zoning and regulatory codes that limit their ability to build and renovate in places where Americans want to live. No surprise, then, that home prices and monthly rentals are soaring, with Fannie Mae predicting shelter inflation at 4.5% or more for years to come.

Job openings across the economy are at a record. With total employment still 5.6 million below February 2020, this shortage might seem anomalous. But during the pandemic, many workers over 60 decided to retire early, and most won’t reconsider. The number of workers unemployed for six months or more is three times what it was 18 months ago. Those with rusty skills may be slow to come back to the job market. Some never will.

The workers who do return will face new obstacles, including a mismatch between skills and jobs. The post-pandemic economy is demanding more workers in transportation and warehousing, while needing fewer in food service. Resolving such mismatches will take time, even if retraining programs work well, which they often don’t. And looking further down the road, the rate of increase in the labor force has slowed to a trickle, as has the flow of new immigrants, who have been essential to bolstering the labor force.

Then there are shortages of semiconductors, which have become key components of automobiles and electronics. Most auto makers have announced production cuts, leading to shortages at car dealers and high prices for consumers. There are no closed plants to reopen; the world’s semiconductor industry is running at capacity, and dependence on production in China and Taiwan is increasing. Building new production facilities to this industry’s exacting specifications will be costly and time-consuming, as will shifting new production capacity to mitigate rising risks of depending on China.

Semiconductors are part of a larger story. In recent decades, corporations have become dependent on global supply chains to keep the prices of labor and materials down and to maintain lean inventories, further reducing costs. The pandemic, protectionism and global tensions are forcing them to reconsider this strategy. But moving away will take time and raise costs.

Meanwhile, the global supply chain itself has become a bottleneck, as a recent Journal report notes. Ships are waiting offshore to unload as containers pile up in ports. Shortages of equipment, trucks, drivers and warehouses are slowing the movement of goods from ports to businesses. Requiring employees to work overtime raises labor costs, spurs resignations, and often bumps up against safety and union requirements.

Amid the vortex of these developments, businesses—from Costco and FedEx to neighborhood restaurants—have been able to pass the higher prices they are paying for goods and services on to consumers without encountering resistance or losing market share.

You don’t need a doctorate in economics to understand that when rising demand meets too little supply, the result is inflation. If structural changes turn out to be the main cause, Americans shouldn’t expect the consequences—higher prices at the store—to be “transitory."