After U.S. inflation surged 5.4% in June from a year earlier in its biggest monthly gain since August 2008, it once again rose 5.4% in July. Even when excluding food and energy components, inflation rose 4.3% year-over-year for the month of July. This surge in consumer prices seems to be unique to the United States, at least in comparison with the world’s largest economies.

The U.K. has seen some rise in inflationary pressures but nothing like what has happened in the United States. U.K. core inflation is still below 2.5%, although it is up from a pandemic low of around 1%. Meanwhile, eurozone core inflation is around 1%, only half of the European Central Bank’s theoretical target of “just below 2%.”

Part of the reason for higher U.S. inflation relates to used car prices, which are 3.7% of the index weighting and up 45% year-over-year. Even excluding used cars, U.S. headline inflation would still be running at 4% year-over-year, far higher than in Europe or elsewhere. Meanwhile, the U.S. housing sector has not been a major contributor to rising U.S. inflation. Rental costs and so-called “owners’ equivalent rent” — the amount that owners would hypothetically pay themselves in rent if they rented their properties rather than owned them — are up only about 2.3% year-over-year. Outside of housing, U.S. inflation is about 0.7% higher than the headline figures suggest.

The U.S. inflation situation appears to be unique and may be the result of the country’s way of handling the labor market crisis during the pandemic. Although European responses varied somewhat by country, governments generally mitigated lockdown-related unemployment by lending money to employers to keep workers on staff and making those loans forgivable so long as workers were not laid off. As such, when lockdowns ended and businesses reopened, workers simply returned to their previous jobs. The rise in U.K. and eurozone unemployment was fairly modest because even when they were not able to show up for work, most workers in these nations were still technically employed and on payroll.

By contrast, U.S. employers laid off workers in droves in March and April 2020, sending the unemployment rate soaring from 3.5% to 14.8%. These workers could then apply for enhanced unemployment benefits, which untethered them from their previous employers. Depending on the state, the enhanced benefits lasted for 15-18 months, and for many low-wage workers, the benefits paid about the same, and in some cases more, than their previous employment. Meanwhile, some workers relocated, moving in with friends or family members.  Some left high-cost areas like New York and San Francisco to live in areas with lower costs of living.

As the U.S. economy began to reopen, this meant that workers were not necessarily able to return to their previous employers even if they wanted. This in turn sent employers scrambling for talent, in some cases offering signing bonuses or wage increases in order to entice workers back. Nothing comparable appears to be happening in Europe.

Moreover, the shortage of workers aggravated supply chain issues in the U.S. In the rest of the world, there have been supply-line problems pertaining to shipping containers and extremely strong demand for manufactured items, but these issues have not, by all appearances, generated the kind of inflationary pressures that so far seem to be peculiar to the U.S.