Inflation–the public point of view

Letter to the editor in today’s St Louis Post-Dispatch points out that while the feds are happy about a much improved 4% inflation rate, that is on top of 10% increases in grocery prices last year. For a total of 14% as seen by the consumer.

The feds may be happy with the prospects of a soft landing, but voters are not impressed.

When do we get to the disinflation phase?

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Going from 10% to 4% is disinflation.

The important question is when will wage growth catch up with price growth. As Hawkwin posted two weeks, there is an end of 2024 projection for that.

DB2

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Bankrate’s Wage To Inflation Index uses the Department of Labor’s employment cost index (ECI) and consumer price index (CPI)

“The Employment Cost Index (ECI) measures the change in the hourly labor cost to employers over time. The ECI uses a fixed “basket” of labor to produce a pure cost change, free from the effects of workers moving between occupations and industries and includes both the cost of wages and salaries and the cost of benefits.”

Why use the measure that is important to employers? Many are changing occupations to get higher wages. ECI misses this, as it stays with the buggy whip manufacturers. Maybe look at Real Median Personal Income.

year income
1977 26,680
1982 25,140
1987 28,220
1992 28,800
1997 32,260
2002 34,330
2007 36,370
2012 33,510
2017 37,690
2022 40,480

Real 10 year growth is at record highs. (The period 2012 to 2022 at 1.91% beats the period 2011 to 2021 at 1.86%.) There’s no “catching up” to be done.

income
from to 10yCAGR
1977 1987 0.6%
1982 1992 1.4%
1987 1997 1.3%
1992 2002 1.8%
1997 2007 1.2%
2002 2012 -0.2%
2007 2017 0.4%
2012 2022 1.9%

Real Median Personal Income in the United States (MEPAINUSA672N)

Real Median Personal Income roughly follows a staircase pattern, with periods of no growth and periods of growth:

year year ending income
from to income length CAGR
1974 26,990
1974 1981 24,880 7 -1.2%
1981 1989 29,840 8 2.3%
1989 1992 28,800 3 -1.2%
1992 2000 34,570 8 2.3%
2000 2004 34,430 4 -0.1%
2004 2007 36,370 3 1.8%
2007 2012 33,510 5 -1.6%
2012 2019 40,980 7 2.9%
2019 2022 40,480 3 -0.4%
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It would be nice to see some negative numbers.

Some of the inflation was temporary. The long delays container ships had unloading on the west coast drove prices to new highs and limited supplies of imported goods. That is resolved. We should see some price reductions.

Wage increases are important to many but retirees often have fixed income pensions with no inflation protection.

Retailers report customers are resisting continuing price increases.

When does the gouging stop?

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That used to be the case, but is it still true? Pensions in the private sector as are rare as dodo birds these days. It’s all 401k and social security.

–Peter

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Since October I have had four wage hikes. My pay is up 12%. I have two more wage hikes scheduled six months and twelve months from now. I am not salary. Only our top management is. We have also had other perks that total roughly 5% more in job benefits. That does not include the 401k or healthcare benefits.

I have not taken promotions because I am working on so many side projects. Everyone around me is taking promotions which means they have made between 10% and 35% more money beyond my scaling up in the same business.

I won’t say where I work. If I mention their name or industry I have to represent them. It is a major corporation.

If you are a Millennial-aged manager right now in a major business you own the world.

Yes, many from the days of pensions still have them. I have one from 1996. Many of us are retired for 30 years or more. As many as half of older retirees may have pensions.

And they seem to be under discussion for return. Auto workers strike asked for them. I don’t know if they got them.