September data show that inflation continues to erode earnings
The Bureau of Labor Statistics (BLS) released its numbers for inflation in September today:
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in September on a seasonally adjusted basis, after increasing 0.6 percent in August…Over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment.
That year-on-year number — 3.7% — is interesting, but what matters is the monthly number; 0.4%. That is moving in the right direction again after spiking in August. The money supply on the M2 measure continues to drift down from its peak in April 2022, albeit at a slower rate, so I still expect inflation to trend down.
It is important to note that a falling rate of inflation does not mean that prices are falling, only that they are rising less quickly than they were. That monthly rate of 0.4% is still more than double the rate needed to hit the Federal Reserve’s target of 2% annually and is consistent with an annual rate of nearly 5%.
Another BLS release today illustrates why this inflation is a problem. Data for real earnings — that is, adjusted for inflation — showed that:
Real average hourly earnings for all employees decreased 0.2 percent from August to September, seasonally adjusted…This result stems from an increase of 0.2 percent in average hourly earnings combined with an increase of 0.4 percent in the Consumer Price Index…
So an increase in earnings of 0.2% was more than offset by that increase in prices of 0.4%. This explains why, when Democrats try to tell Americans that they’ve never had it so good, Americans aren’t buying.