The Consumer Price Index for all items rose 8.3 percent for the 12 months ending in July, a smaller amount than the 8.5-percent increase for the period ending in July or the 9.1-percent increase for the period ending in June, but still near a 40-year high.
From July to August the CPI rose 0.1 percent on a seasonally adjusted basis, a small increase but hotter than expected and disappointing to those who had hoped to see a monthly decline given falling fuel prices.
“This is a much much worse CPI report than anyone was expecting,” tweeted Justin Wolfers, professor of economics and public policy at the University of Michigan and a senior fellow at the Brookings Institution. “The decrease in headline inflation due to lower energy prices is there, but the underlying rate—best proxied by core inflation—is running a fair bit higher than anyone forecast and most of us hoped.”
He added, “To state the obvious: Inflation remains an important and central concern and will be the focus of macro policy for some time to come.”
Increases in the shelter, food and medical care indexes were the largest of many contributors to the broad-based monthly increase. These increases were mostly offset by a 10.6-percent monthly decline in the gasoline index. Gas prices are still up 25.6 percent year over year.
High inflation means the buying power of workers’ take-home pay has been shrinking. Real (inflation-adjusted) average hourly earnings fell 2.8 percent, seasonally adjusted, from August 2021 to August 2022, the BLS separately reported. The change in real average hourly earnings combined with a decrease of 0.6 percent in the average workweek resulted in a 3.4-percent decrease in real average weekly earnings over this period.
Resilient inflation also means that the Federal Reserve is likely to continue with large interest rates hikes to slow the economy, increasing recession concerns.
Pay Raises Likely to Trail Inflation
Several recent 2023 forecasts have projected an average increase of just over 4 percent for next year’s salary budgets among private-sector U.S. employers, in line with the actual increases to pay budgets made in 2022 but less than half the current inflation rate. Among some industries with high demand for skilled professionals, such as engineering and science, base salary increases may surpass 4.5 percent, however.
Workers Struggling Financially
In new data from the Society for Human Resource Management (SHRM) Research Institute, 28 percent of U.S. workers said they are struggling financially, with more indicating their family (30 percent) and friends (38 percent) are also struggling.
The findings are from a sample of 507 employed Americans surveyed from Aug. 11 to Aug. 16, with the data weighted to reflect the U.S. adult population. The study used the AmeriSpeak Omnibus survey panel compiled by NORC, an independent research institution at the University of Chicago.
Nearly 2 in 5 workers (39 percent) indicated that if they were no longer working or receiving pay, it would take just one month or less before they could not financially meet their basic needs.
Workers who are high school graduates or equivalent were more likely to feel they are struggling financially (44 percent said so), compared to workers with a bachelor’s degree (23 percent) and workers with a post -graduate or professional degree (16 percent).