CPI jumps 5% in May of 2021, fastest since 2008
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There's one hopeful sign for the Fed on inflation. Really.
Slower wage growth could help bring down prices and ultimately mean less sting for the average worker.
https://www.politico.com/news/2022/07/13/pay-raises-smaller-prices-workers-00045482
Victoria Guida (13 July 2022)
Wage gains for American workers are beginning to slow, threatening one of the few positive trends for the economy since the pandemic. But that could be good news for the nation’s labor force.
The government on Wednesday reported that inflation soared 9.1 percent in June — the biggest 12-month jump since November 1981. Prices rose across the board, but not because of salary increases, which have actually leveled off in recent months.
That matters because if prices and wages keep pushing each other up, the Federal Reserve — already under tremendous strain to rein in inflation — might be forced to move even faster to ramp up interest rates, throwing people out of work and thrusting the economy into a painful recession. Instead, slower wage growth could help bring down prices and ultimately mean less sting for the average worker.
“If we have a wage-price spiral, the Fed really has to slam on the brakes,” said Dean Baker, a senior economist at the progressive Center for Economic and Policy Research. “You can’t have that if wage growth is slowing, and it clearly is.”
“This takes an enormous amount of pressure off the Fed,” Baker said.
For now, that’s cold comfort to millions of Americans who are seeing less and less money left over in their wallets after their monthly expenses. The trend has contributed to a dour national mood that could feed fears of an impending economic slump and doom Democrats’ prospects at the polls in November.
The latest consumer price index report showed that prices skyrocketed by 1.3 percent in June alone from the previous month, partially reflecting a jump in gas prices that has since begun to ease. Senior administration officials told reporters on a call before the data was released that this would mean that any top-line inflation number is overstating what Americans are experiencing now.
But while administration officials had hoped for good news in so-called core inflation, which excludes the more volatile food and energy prices, costs there also accelerated.
The Fed generally pays more attention to core inflation than to the top-line number, because it’s considered a better indicator of where prices are headed, though Chair Jerome Powell has warned that rising gas prices might fuel expectations of higher inflation.
The central bank also looks at wages.
Average wages this year are up more than 5 percent from a year ago, the fastest pace since Ronald Reagan’s presidency. But that has caused concern at the Fed that the trend might accelerate and feed back into price increases, which have already been eating away at those impressive gains. The steady decrease in the speed at which wages are rising could allay those fears.
In a memo to reporters, White House National Economic Council Director Brian Deese and Council of Economic Advisers Chair Cecilia Rouse noted that average hourly earnings grew at a 4.2 percent annualized rate in the three months ending in June, down from 4.8 percent the previous quarter and 6.1 percent in the last quarter of 2021.
The picture for wages when adjusted for inflation “is terrible right now,” said Jason Furman, former chief economist for President Barack Obama and a professor at Harvard University. That’s because people are getting raises much more slowly than prices are rising.
But the slowdown in wage increases “might mean the Fed needs to raise less aggressively, so it can do a better job of preserving jobs,” Furman said.
Slowing wage data has increased optimism among some economists that the Fed will be able to avoid causing a recession. But an important component of that outlook is that inflation will still need to come down.
The central bank and other forecasters still expect some of the big drivers of price spikes — like supply chain snarls — to eventually fade, while global prices for food and oil might stay high but stop rising. That too could help the Fed avoid having to cause a significant increase in unemployment in its battle against inflation. But nothing is guaranteed.
Arindrajit Dube, a professor at the University of Massachusetts Amherst and a research associate at the National Bureau of Economic Research, said wages now seem to be rising at a reasonable rate that isn’t problematic from an inflation perspective.
“But if wage growth slows down a little and inflation stays high, that’s not good for workers,” he said. “Threading the needle is what we’d like to see happen.”
From the Fed’s perspective, officials don’t want to see inflation become a more permanent feature of the economy through pay raises.
“If it’s not built into wages, then it’s unlikely to be a long-run entrenched phenomenon,” Dube said.
There's one hopeful sign for the Fed on inflation. Really.
Slower wage growth could help bring down prices and ultimately mean less sting for the average worker.
https://www.politico.com/news/2022/07/13/pay-raises-smaller-prices-workers-00045482
Victoria Guida (13 July 2022)
Wage gains for American workers are beginning to slow, threatening one of the few positive trends for the economy since the pandemic. But that could be good news for the nation’s labor force.
The government on Wednesday reported that inflation soared 9.1 percent in June — the biggest 12-month jump since November 1981. Prices rose across the board, but not because of salary increases, which have actually leveled off in recent months.
That matters because if prices and wages keep pushing each other up, the Federal Reserve — already under tremendous strain to rein in inflation — might be forced to move even faster to ramp up interest rates, throwing people out of work and thrusting the economy into a painful recession. Instead, slower wage growth could help bring down prices and ultimately mean less sting for the average worker.
“If we have a wage-price spiral, the Fed really has to slam on the brakes,” said Dean Baker, a senior economist at the progressive Center for Economic and Policy Research. “You can’t have that if wage growth is slowing, and it clearly is.”
“This takes an enormous amount of pressure off the Fed,” Baker said.
For now, that’s cold comfort to millions of Americans who are seeing less and less money left over in their wallets after their monthly expenses. The trend has contributed to a dour national mood that could feed fears of an impending economic slump and doom Democrats’ prospects at the polls in November.
The latest consumer price index report showed that prices skyrocketed by 1.3 percent in June alone from the previous month, partially reflecting a jump in gas prices that has since begun to ease. Senior administration officials told reporters on a call before the data was released that this would mean that any top-line inflation number is overstating what Americans are experiencing now.
But while administration officials had hoped for good news in so-called core inflation, which excludes the more volatile food and energy prices, costs there also accelerated.
The Fed generally pays more attention to core inflation than to the top-line number, because it’s considered a better indicator of where prices are headed, though Chair Jerome Powell has warned that rising gas prices might fuel expectations of higher inflation.
The central bank also looks at wages.
Average wages this year are up more than 5 percent from a year ago, the fastest pace since Ronald Reagan’s presidency. But that has caused concern at the Fed that the trend might accelerate and feed back into price increases, which have already been eating away at those impressive gains. The steady decrease in the speed at which wages are rising could allay those fears.
In a memo to reporters, White House National Economic Council Director Brian Deese and Council of Economic Advisers Chair Cecilia Rouse noted that average hourly earnings grew at a 4.2 percent annualized rate in the three months ending in June, down from 4.8 percent the previous quarter and 6.1 percent in the last quarter of 2021.
The picture for wages when adjusted for inflation “is terrible right now,” said Jason Furman, former chief economist for President Barack Obama and a professor at Harvard University. That’s because people are getting raises much more slowly than prices are rising.
But the slowdown in wage increases “might mean the Fed needs to raise less aggressively, so it can do a better job of preserving jobs,” Furman said.
Slowing wage data has increased optimism among some economists that the Fed will be able to avoid causing a recession. But an important component of that outlook is that inflation will still need to come down.
The central bank and other forecasters still expect some of the big drivers of price spikes — like supply chain snarls — to eventually fade, while global prices for food and oil might stay high but stop rising. That too could help the Fed avoid having to cause a significant increase in unemployment in its battle against inflation. But nothing is guaranteed.
Arindrajit Dube, a professor at the University of Massachusetts Amherst and a research associate at the National Bureau of Economic Research, said wages now seem to be rising at a reasonable rate that isn’t problematic from an inflation perspective.
“But if wage growth slows down a little and inflation stays high, that’s not good for workers,” he said. “Threading the needle is what we’d like to see happen.”
From the Fed’s perspective, officials don’t want to see inflation become a more permanent feature of the economy through pay raises.
“If it’s not built into wages, then it’s unlikely to be a long-run entrenched phenomenon,” Dube said.
Madison320
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The "wage-price" spiral is a bunch of crap. Wages are prices and they're going up for the same reason all prices are going up. Because the Fed printed 8 trillion dollars.
Madison320
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I'm getting crushed lately. My inflation hedges are getting killed by ... inflation.
The dog food I buy from amazon was always $50. About 4 months ago it went to $52. Then $54. I just bought some today and it's $62! On top of that amazon's 2 day delivery is up to about 6 days. I think UPS and FedEx must be getting hammered. It seems like everything now is shipped by usps. They just try to cram it in my mailbox.
I think we're seeing the massive amounts of money that's been printed over the last 12 years finally moving from the stock market to the grocery market. It's really getting that "end of days" feel to it. It's not just in the US. All the major democracies are crashing from decades of over consumption.
The amount of money out there right this minute is staggering . Pretty much why we are where we have arrived. Once you get that shit rolling people dont seem to understand how difficult it is to stop . The next hike of .75 isnt going to do it.Youve got people sitting on cash from bitcoin they sold for 25K they bought under 1k , youve got the Dow down 24 percent and none of it went back into the markets on top of what the fed and govt has done etc
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Swordsmyth
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After the CPI data, investors even began talking about 100 basis point hikes in the Fed funds rate at the next FOMC meeting July 26-27, perhaps the most aggressive monetary tightening seen since the early 90’s.
Federal Reserve Board of Governors member Christopher Waller however came out and voiced support for a 0.75% rate hike at the next meeting, but said he would back a 1% hike if upcoming economic releases show strong consumer spending.
Following Wednesday’s CPI data, Atlanta Fed President Raphael Bostic said, “Everything is in play,” and when asked if that included a 100 basis point hike, he said, “it would mean everything.”
More at: https://www.thefinancialtrends.com/2022/07/15/rate-hikes-recession-fears-keep-stocks-mixed/
Krugminator2
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According to S & P Global Market Intel the preliminary snapshot for July shows contraction of roughly 3 to 4 1/2 percent . With a reading of 47 , June reading of 51.6 and readings below fifty in contraction. I am though not expecting any relief from inflation growing between now and labor day. Locally gasolinne at 4.60 after a high of 5.26 but no real changes in diesel which is still 5.70 to 6. Looking at the rising costs of mnfg , no relief before the weather turns cold and people face higher heating costs to go along with Christmas.
Inflation still chooglin' . Fed raises rate another 3/4 as expected to about 2 1/2 , according to the fed June sentiment they would need to get to 3.8 next yr for any improvement. No changes. Still inflation , still fed says in Sept they will begin dumping about 95 billion per month in assets of the 9 trillion balance sheet. So at this point next increase in interest should be 9/21.
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economy shrinks second quarter by about a percent as expected. so on avg through the first six months of the yr about a negative 1 1/4 .i'm not expecting jul to be better and think oct has potential to be worse.anyway try and find something to be happy with because you are in a recession and there is ten percent or more inflation , your dollar is worthless and will become more so ea day. i'm cooking out bratwurst for lunch today , cut back on the ribeyes and i'm still happy.
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Madison320
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I've said this a million times so this'll be a million and one. We've probably applied the greatest amount of stimulus in the history of mankind over the last 12 years. 20 trillion in debt, 8 trillion in printed money, 5-7 trillion in trade deficits, 0% rates. We have to crash from all that stimulus, it's inevitable. And it's logical that the crash is proportional to the stimulus so hang on.
My guess over the next couple months is that price inflation comes down a little and at the same time the economy is going to continue to slow and unemployment will start to pickup. At some point soon recession is going to be a bigger political problem than inflation and at that point the Fed is going to pivot to lower rates and more QE.
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CaptUSA
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Don't worry... The inflation-reduction-act-of-2022 will save the economy!!
How can you possibly vote against something with a name like that?! Do you NOT want to reduce inflation?!! Are you NOT a patriot?
How can you possibly vote against something with a name like that?! Do you NOT want to reduce inflation?!! Are you NOT a patriot?
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Fighting Inflation With Inflation - Razör Rants
"No, dig UP, stupid!" - Da Gubment
https://odysee.com/@RazorFist:1/fighting-inflation-with-inflation-razör:d
Looks like the new dem bill raises my taxes between 1.1 and 3.1 percent next yr depending on if I turn in 10K or30k in income . Thats those dems always looking out for you . The new 15 percent mnimum corporate tax will push future jobs further overseas also along with a 25 billion oil tax to raise gas prices for the poor. Great job dumb fucks.
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New dem bill will give IRS 80 billion over ten years and add 87k irs agents which I think will bring the amount of annual ahdits to 2 million from the current 600 to 700k audits. All of this coming when you cannot even contact the IRS. I also project these expenditures to bring in zero cash . If it does raise any monies it will come from the low class suffering under inflation from this same govt. and it will not pay for this expansion. Current bill also expected to result in net loss of 30K private sector jobs further reduciing revenues. The destruction of america continues under dem house.
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Madison320
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It's been real quiet the two months or so. I have a feeling something is going to break soon. Our economy is addicted to stimulus and can't go without for very long.
Watch the federal debt. I think that's going to start to spike. When there's a recession the debt usually start to ramp up. Less tax revenue from income and more spending from unemployment, etc.
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