The key to understanding what’s going on is inflation. Many experts are looking at it the wrong way. The White House, the news media and Wall Street largely focus on the monthly reports that say how much inflation rose over the past month and year. For example, the latest read was 3.1 percent from January 2023 to January 2024 — down significantly from 6.4 percent a year ago. But many Americans think about inflation over a longer time, focusing on the cumulative increase since 2020. The number that sticks in most people’s heads is 20 percent. This is roughly how much inflation is up since the coronavirus pandemic began. (It’s up about 18 percent since Biden took office).
Inflation has shocked and angered Americans. It doesn’t help that prices for many of the most visible items that people pay for frequently — gas, groceries, electricity and rent — have surged since 2021. Rent is up nearly 20 percent, while groceries are up 21 percent. Meanwhile, electricity is up 28 percent and gas is almost 35 percent higher. Some can recall what they used to pay. And on budget or banking apps, it’s easier than ever to compare costs now with those a few years back. Americans haven’t spent this much of their income on food in 30 years. And they don’t need to know the exact data to feel the sting.
Of course, the inflation news is not all gloomy. Clothing prices have increased only 8 percent and appliance prices about 6 percent since Biden took office. Toys and medical insurance have actually gotten cheaper over the past three years, according to the Bureau of Labor Statistics. But many of these items are infrequent purchases, so they don’t stick in people’s mind that much. It’s also harder to make apples-to-apples comparisons because people rarely buy the same toy twice.
The administration has been quick to point out that wages have also soared since Biden took office. This has undeniably been one of the best times in decades for people to get better jobs, because companies have had to offer higher pay and added flexibility to attract workers. Since 2020, average hourly wages are up 21.5 percent — compared with about 20 percent inflation. The picture is slightly less rosy since January 2021: Wages are up 15.4 percent vs. 18 percent for inflation. But these are averages. Remember that essentials — gas, groceries, rent and car insurance — are up more.
“There’s been euphoria among economists that we got inflation down,” said Constance Hunter, a senior adviser at MacroPolicy Perspectives. “But if you look at the cumulative price increases since the pandemic started, the numbers are still really big. People are still feeling the impact.”
Hunter has started tweeting out a monthly dashboard that shows how much food, energy and rent are up since February 2020. Others would be wise to pay attention to the same data.
Another key to understanding the United States’ enduring pessimism is to look at the big inflation spikes since the pandemic. First, it came in the price of rental cars. This was so crazy for a while that people were trying to rent U-Haul trucks because they couldn’t get cars at the airport. Then, gas prices shot up, briefly topping $5 a gallon a few months after Russia’s full-scale invasion of Ukraine in February 2022. Next, it was egg-mania. It’s been whack-a-mole inflation; as soon as one price surge eased, something else spiked. It’s no wonder people are still concerned and wondering what’s next.
“People focus on whatever is the worst thing at the moment,” pollster Geoff Garin of Hart Research told me. “When gas prices were high, they focused on gas prices. When gas prices dropped substantially, it didn’t matter all that much. Then, they focused on prices at the grocery store.”
This kind of inflation is tailored made for the TikTok era. Every few months, there’s something new to obsess about. Even now, when inflation is cooling overall, the price of car insurance is rising — up more than 20 percent in the past year (and 44 percent since Biden took office). It’s possible to save on a grocery store bill by eating less meat, but it’s a lot harder to cut back on car insurance.
The story of inflation since 2020 is a vastly different than the upbeat picture from just the past year. The good news today is people’s wages are really starting to outpace inflation. The longer this goes on, the more likely it is that Americans will notice they are better off and that the worst is over.
But it sure will help Americans if there isn’t another necessity whose price spikes this year.
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