Record-breaking inflation hammered American households for yet another month.
According to data just released by the Bureau of Labor Statistics, inflation on all consumer goods rose to a 40-year high of 7 percent.
Grocery-store shortages are also compounding the pain and souring Americans on the state of the economy.
Inflation rose among all of the major categories of goods.
Take a look at IWF’s monthly inflation tracker to view price increases in popular household items and services:
For women shopping for their households every week, the rising costs are not just numbers, but the loss of purchasing power. Our dollars are simply not going as far as they did a year prior.
Retailers say that consumers have not altered shopping their shopping behavior too much because of price. Many households enjoy strong financial positions because of rising wages, uninterrupted work, and government stimulus or benefits over the past two years.
However, more recent shortages of goods are plaguing grocers and retailers nationwide. As the trending #Bidenbareshelves demonstrates, shoppers are frustrated that they cannot find items as basic as meat, milk, and bread.
The White House has touted that wages are rising. However, those are nominal wages. Real wages, or inflation-adjusted pay, actually fell 2.4 percent from a year prior.
No matter how much pay is increasing for the American worker, inflation is outpacing it making it difficult for families to keep up. Those who struggle the most are those who can least afford the higher prices.
Low-income families, poor workers, and elderly people on fixed budgets spend proportionately more of their income on groceries. This decades-high inflation is a punishing tax that they can’t escape. It’s especially painful when prices are rising on goods for our most basic dietary and sanitary needs.
Causes of inflation
As we explained in our recent policy focus, inflation occurs when there are too many dollars chasing too few goods. Prices rise as quantities of goods fall.
There are too few available goods in part because of the national worker shortage to produce, package, transport, and place goods on store shelves. Millions of workers remain sidelined from the labor force for varying reasons including retirement, fear of catching COVID, and childcare and school closures.
Employers are hiking wages to attract and retain workers, and rising wages are feeding price increases as they pass some of those costs of production along to consumers.
The government doesn’t have to be the answer, but it better not be the problem.
The Biden Administration doesn’t have a good answer as it what to do. President Biden declared victory in fixing supply-chain issues in December. However, shortages are back as the Omicron variant is hitting our labor force and forcing sick employees to remain at home.
Massive federal spending has in part fueled some of this inflation, particularly by disincentivizing work. Washington needs to press the breaks on more federal spending, namely the Build Back Better Act that currently sits on ice. As this variant ebbs, workers will stream back and alleviate some of the short-term pressure. What we don’t need more of is fiscal or monetary stimulus to the economy.