Inflation rate hits 41 year high

On Tuesday, the Bureau of Labor Statistics (BLS) announced that inflation was 1.2 percent in March and 8.5 percent over the year (for the Midwest the figures were 1.3 percent and 8.6 percent, respectively). This is “the largest 12-month increase since the period ending December 1981.”

The Biden administration is keen to blame this on the war in Ukraine’s impact on energy prices: Indeed, “the energy index rose 32.0 percent over the last year.”

But the BLS also notes that stripping out volatile food and energy prices to get ‘core inflation,’ prices were up 6.5 percent over the last year, “the largest 12-month change since the period ending August 1982.” The fact that this inflation is broadly based shows that it is not the result of a particular recent event like the war in Ukraine — though that has certainly exacerbated it — but of the much more rapid increase in the amount of money to spend than in the amount of stuff to spend it on.

Over the last year, the Biden administration has gone from arguing that inflation is transitory, to arguing that it is a sign of a healthy economy, to blaming it on greedy corporations, to now blaming it on Vladimir Putin. None of this suggests that the administration has any idea, much less any plan, for how to deal with this.

To see the costs of this inflation we can look at another release from the BLS today. Data for real earnings — that is, adjusted for inflation — showed that:

Real average hourly earnings for all employees decreased 0.8 percent from February to March, seasonally adjusted…This result stems from an increase of 0.4 percent in average hourly earnings combined with an increase of 1.2 percent in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings decreased 1.1 percent over the month due to the change in real average hourly earnings combined with a decrease of 0.3 percent in the average workweek.

So, average hourly earnings went up by 0.4 percent, but with prices up by 1.2 percent, they were down by 0.8 percent in real terms. Over the year, the BLS notes, “Real average hourly earnings decreased 2.7 percent, seasonally adjusted.” Americans, on average, are worse off.