Paychecks are down as inflation hit another record high
Inflation does not seem to be slowing down. In fact, according to the latest data from the Bureau of Labor Statistics (BLS), prices rose 1.3 percent in June compared to May. This is higher than May’s 1.0 percent over-the-month rise. And compared to June 2021, prices are up 9.1 percent.
The largest contributing factors, according to BLS, were gasoline, food, and shelter.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.3 percent in June on a seasonally adjusted basis after rising 1.0 percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 9.1 percent before seasonal adjustment.
The increase was broad-based, with the indexes for gasoline, shelter, and food being the largest contributors. The energy index rose 7.5 percent over the month and contributed nearly half of the all items increase, with the gasoline index rising 11.2 percent and the other major component indexes also rising. The food index rose 1.0 percent in June, as did the food at home index.
This is the highest increase since November 1981.
The all items index increased 9.1 percent for the 12 months ending June, the largest 12-month increase since the period ending November 1981. The all items less food and energy index rose 5.9 percent over the last 12 months. The energy index rose 41.6 percent over the last year, the largest 12-month increase since the period ending April 1980. The food index increased 10.4 percent for the 12-months ending June, the largest 12-month increase since the period ending February 1981.
Paychecks keep shrinking
Due to these rising prices, paychecks have shrunk even further since May. The BLS announced that real wages are down 1 percent in June compared to May. But compared to June last year, real wages are down 4.4 — after taking into account declining work hours. This is higher than May’s over-the-year decline of 3.0 percent.
Real average hourly earnings for all employees decreased 1.0 percent from May to June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from an increase of 0.3 percent in average hourly earnings combined with an increase of 1.3 percent in the Consumer Price Index for All Urban Consumers (CPI-U).
Real average weekly earnings decreased 1.0 percent over the month due to the change in real average hourly earnings combined with no change in the average workweek.
Real average hourly earnings decreased 3.6 percent, seasonally adjusted, from June 2021 to June 2022. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 4.4-percent decrease in real average weekly earnings over this period.
In April, the United States Congress Joint Economic Committee estimated that if inflation was to stay the same, the average Minnesota household would spend about $9,000 extra per year. But looking at these numbers, Minnesotans will spend a lot more than that.
On the bright side, gasoline prices have been trending down. So, this could bring overall prices down in the next report. However, the long-term effect on inflation of these gas price changes as well as the Fed’s interest rate hike is yet to be seen.