At Bloomberg Olivia Rockeman reports that prices increased by 5% in June on a year-on-year basis:
Prices paid by U.S. consumers surged in June by the most since 2008, topping all forecasts and complicating the Federal Reserve’s debate over how soon to unwind ultra-easy monetary support for the economy.
The consumer price index jumped 0.9% in June and 5.4% from the same month last year, according to Labor Department data released Tuesday. Excluding the volatile food and energy components, the so-called core CPI rose 4.5% from June 2020, the largest advance since November 1991.
and in some categories, e.g. for used cars prices increased at the fastest rate on record: 40%. Inflation-adjusted hourly wages fell by 1.7%. Pressure on wages is sure to follow.
Looking at the monthly inflation data — inflation has been running at 10%+ annualized since the beginning of the year. Inflation is at 5% yoy because of the low inflation readings from the 2nd half of 2020.
This implies yoy inflation is likely to continue increasing, reaching 10% at the end of the year.
One more nugget, the housing component of the CPI (30+% of the index) just bottomed in the last 2 months — they were held back due to the eviction moratoriums. Given real estate prices increased 20+% yoy; rent have some catching up to do…. and that will show up inflation figures over the next year.
“Inflation-adjusted hourly wages fell by 1.7%.”
At what point does the working class rebel?
Trump was the warning flare. Next up, the American Mussolini?
Ones I know have a different attitude than I had when young.
I wanted the most money I could earn. Hours didn’t matter. As long as they can get on line many younger people today don’t want to trade their entire waking lives for money, and I’m not sure they aren’t being smarter than I was.
In 1941 war broke out and my mother moved a hundred miles to Omaha to build bombers. Not patriotism so much as a job.
CuriousOnlooker:
Shorter: the Fed governors screwed up.
Oh, c’mon. Its all just transitory. You know, just like only 2 weeks to bend the curve………………
I think it is transitory. The population is aging, rebound spending and supply shortages will subside post pandemic.
Advertisers say people spend most at around 47 years of age and boomers are way past that.
The only inflationary danger I see is if we really mean to onshore manufacturing instead of just diversify sources which I suspect.
The world will be long on desperate, cheap labor far as the eye can see.
I would not conclude the Federal Reserve screwed up yet… My threshold for a mistake is if this period is shown as an example of what not to do in the economic textbooks taught to undergraduates in the future.
I checked the news yesterday and the inflation report was the 4th/5th item on the New York Times, Washington Post webpage, so this has not even entered into the “awareness” stage.
One other nugget — which Bill McBride touched on. Social security is indexed to inflation; and the adjustment will be based on YOY inflation for July, August, September. I suspect the COLA will be higher the Mr. McBride’s estimate — somewhere around 6%. Since that is higher then wages are increasing or the interest rate on the bonds that social security fund owns — the social security fund will be depleted faster.
I’ve written about Social Security’s woes many times. I disagree with those who characterize it as a “Ponzi scheme” but I do think it has suffered from assumption failure. All that was necessary for the system to remain solvent was for the median wage to rise faster than it has. One of the problems in a policy targeted at maximizing the number of minimum wage jobs.