Inflation slowed in the month of August according to newly released government data, but Americans are still shelling out a lot more for everything from gas to groceries than in 2020.
Consumer prices rose just 0.5% in August from July but rose 5.3% in August from a year earlier. That is near a 13-year high.
Independent Women’s Forum’s Center for Economic Opportunity launched an inflation tracker to follow the increases in prices on those items that many women and men purchase each month.
Take a look at some of these items:
Inflation eats up your raise
Wages have been rising for workers, especially those at the lower end of the pay scale, which is a great thing. With fewer workers to compete for, the labor market has pressured employers to raise their wages, offer new benefits and incentives to attract workers.
The problem is that those wage increases are short-lived as workers find that they are spending more on staple household items such as bread, milk, and meat; gasoline and energy bills; clothing, shoes, and haircuts; and shelter. Travel prices are a whole other ballpark.
“Real” or inflation-adjusted wages for lowest-wage workers has actually fallen 0.5% in August from a year earlier, according to other government data. Before the pandemic, real wages were growing by 2.1%.
These stories in the Wall Street Journal illustrate what so many American families are experiencing right now:
Troy Sutton, age 61, lost a job as a custodian at the start of the pandemic in 2020 that paid $12 an hour, and he spent more than a year unemployed. This past summer, he landed a job as a custodian at the University of Pennsylvania he said pays $18 or more an hour.
But Mr. Sutton’s water, electricity and cable bills are higher than a year ago, he said. He is shelling out more for veterinary checkups and dog food for his two Chihuahuas, Princess and Precious. At the supermarket near Mr. Sutton’s house in Philadelphia, eggs climbed from about $2 a dozen in 2019 to $3.69 during the pandemic.
He and his wife started shopping more at supermarket chain Aldi this year, where many groceries are cheaper, he said. But the longer drive and higher gas prices have eaten up some of the savings. He has also cut out brand-name cereals, rice, oatmeal, ketchup and mustard.
Rebecca Reitnauer, age 37, works as a barista for a Starbucks -licensed store at the Sacramento International Airport, a 30-to-40-minute commute from her home in Citrus Heights, Calif. She said it used to cost $45 for a tankful of gas but now costs more than $80.
She and her partner—who also works at the airport—are considering moving in with Ms. Reitnauer’s mother, a 10-minute car ride from the airport, to lower their transportation costs. A move would also keep electricity costs in check, she said, after their electricity bills more than doubled earlier this year.
Inflation is especially hard on poor households. Higher prices at the pump, grocery store, and on housing consume a larger proportion of their budgets and leaves less money for other spending compared to middle and upper-income households.
Is inflation here to stay?
The big question is whether inflation is temporary or permanent.
The generous federal unemployment benefits have expired and states have not been rushing to use stimulus money to continue paying them out, which may push unemployed workers back out into the labor market. There are also over 10 million open positions. More workers mean less competition. Employers may not have to keep raising wages to attract them and passing those costs on to consumers in the form of higher prices.
However, bosses can’t take back the raises they already doled out, so their labor costs are now elevated and that’s not likely to change.
Pandemic-related shortages and bottlenecks in production, manufacturing, and transportation of goods domestically and internationally have also driven prices of goods higher this spring and summer. It will take time for those shortages to ease.
The slowing inflation in August is a welcome sign, but it will take continued slowing of prices to give American families the relief they need especially those with the least means.