If you didn’t get a pay raise of at least 2.7% in the last year, you got a pay cut

Last week, the Bureau of Labor Statistics (BLS) released its numbers for inflation in November. They showed that “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent on a seasonally adjusted basis in November, after rising 0.2 percent in each of the previous 4 months.” Over the linger term, “The all items index rose 2.7 percent for the 12 months ending November, after rising 2.6 percent over the 12 months ending October.”

As Figure 1 shows, after falling sharply from its June 2022 peak of 9.0% to 3.0% in June 2023, the annual rate of increase of the CPI — the commonly reported rate of inflation — has stopped falling. Indeed, the average rate since then, 3.1%, is a full percentage point above the rate — 2.1% — which prevailed over the period from President Trump’s inauguration in January 2017 to the inset of the COVID-19 pandemic in February 2020.

Figure 1

This final round of the Fed’s fight against inflation is proving to be the hardest. Either way, with prices up by 2.7% over the last year, if you didn’t get a pay raise of at least 2.7%, you got a pay cut.