Thursday, July 25, 2024
Share:

Economist: ‘Lower inflation’ still means sky-high costs all around



(The Center Square) – In response to a Consumer Price Index report released Wednesday, numerous reports suggested “overall inflation cooled” and Americans were experiencing “lower inflation.”

Pointing to federal data, one national economist points out that “lower inflation” still means sky-high costs that many Americans can’t afford, as the national debt surpassed an historic $34.7 trillion high on Tuesday.

The newly released CPI data, a benchmark for inflation, states that costs were up 3.3% from the same time last year.

The Wall Street Journal reported, “U.S. inflation slowed in May, an ease in price pressures that boosts the prospect of interest-rate cuts by the Federal Reserve later this year.” Pointing to CPI data, it said Americans paid less for transportation in May than they did in April, medical care service costs and gas prices were less, as were the costs of clothes and dairy products.

Federal Reserve officials have said reaching a 2% benchmark for inflation is the goal before considering cutting the base interest rate. The Fed has reasoned that it increased interest rates to curb inflation, although inflation climbed exponentially as it did so, critics argue.

But the 2% inflation goal and “cooling” inflation “trend” isn’t the best context to understand economic health, one national economist argues. Ultimately, “the trend is not your friend,” E.J. Antoni, an economist with the Heritage Foundation, said, referring to “lower inflation.”

“Regardless of whatever … anyone tells you, the numbers clearly show we were never trending towards the 2.0% inflation target, let alone zero, which is where we should be; we’ve been trending towards 3%+,” he said in social media posts.

“A slower increase [in inflation] is still an increase and prices set a new record high,” he added.

For homeowners, “lower inflation” means “a monthly mortgage payment on a median price home in May was 119.5% higher than” it was in January 2021. “That’s almost $14,000 per year, for 30 years, for the same house,” he said.

For renters, it means paying sky-high rent. “Rent continues rocketing higher, now up 21.6% since Jan ’21,” he said, making it “hard to save for a down payment on a home when your rent is rising almost 10X your income.”

Just three months ago, home buyers needed 80% more income to purchase a home than they did in 2020, The Center Square reported, even as median income increased by 23% at the same time.

For employees, “lower inflation” means an hourly wage growth that “outpaced inflation in May” but the difference is negligible. Pointing to average hourly earnings since January 2021 from Bureau of Labor Statistics data, he said, “We’re so far behind the nominal increase of the last 3+ years that it’s laughable – the difference between real and nominal wages since Jan ’21 is $5.65/hr for average worker; that’s more than he or she pays in federal income tax.”

“Lower inflation” means average hourly earnings are down by 2.2% and average weekly earnings are down by nearly 4% since January 2021 because of “the collapse of full-time jobs” replaced by part-time jobs, he said.

Other economists have also pointed to jobs report discrepancies primarily based on part-time jobs data. They’ve forecast a recession to hit later this year because the labor market and economy aren’t as strong as they seem, The Center Square reported.

“Lower inflation” also means energy prices are up an average of 35.6% in less than 3.5 years, with gasoline and diesel up over 40% and 50%, respectively, Antoni said. The percentages are seasonally adjusted; not seasonally adjusted costs are higher, he said.

It means consumer food prices are up an average of 21.2% since January 2021, he said, but many staples saw much larger price increases. The costs of eggs, bread, and peanut butter are all up by more than 35%; cereal and chicken are up over 25%.

“No wonder people are having to put groceries on credit card,” he said.

“Lower inflation” also means “that virtually all the costs related to owning and operating a vehicle are up 40%+, making it much harder for people to maintain the independence of having their own car or truck,” he said.

Antoni also pointed out that on Tuesday, the U.S. federal debt broke $34.7 trillion for the first time in history. In one day, on Monday, it grew by $37 billion.

“The debt has now risen $7 trillion since January 2021, that’s an annualized rate of over $2 trillion, and accelerating,” he said.