Inflation Sits at 8.2% as Core Prices Hit Four-Decade High
Consumer-price index’s rise eased slightly in September but core index marked biggest increase since 1982
Consumer-price index’s rise eased slightly in September but core index marked biggest increase since 1982
U.S. consumer inflation excluding energy and food accelerated to a new four-decade high in September, a sign that strong and broad price pressures are persisting.
The Labor Department on Thursday said that its so-called core consumer-price index—which excludes volatile energy and food prices—rose 6.6% in September from a year earlier, the biggest increase since August 1982. The measure increased 6.3% in August.
The inflation report likely keeps the Federal Reserve on track to increase interest rates by 0.75 percentage point at its meeting next month. It also raises the risk officials will delay an anticipated slowdown in the pace of rate rises after that or signal that they are likely to raise rates to even higher levels early next year than previously anticipated by policy makers and investors.
U.S. stocks fell in early trading before recovering. Treasury yields rose.
Prices rose last month for housing, medical care, airline fares and other services, threatening to keep inflation high for a while.
Investors and policy makers follow core inflation closely as a reflection of broad, underlying inflation and as a predictor of future inflation. On a monthly basis, the core CPI rose 0.6% in September, the same as in August, and up from 0.3% in July.
“Inflation has built up a lot of momentum over the last year,” said Bill Adams, chief economist at Comerica Bank. “That’s going to keep inflation higher than the Federal Reserve wants it for at least a couple more months—if not a couple more quarters.”
The overall CPI increased 8.2% in September from the same month a year ago, pulled down by a drop in gasoline prices that was partially offset by higher food costs. The reading was down from 8.3% in August and 9.1% in June, which was the highest inflation rate in four decades. The CPI measures what consumers pay for goods and services.
Housing costs rose by the most since the early 1980s, as a strong labour market continues to push up rental rates. The housing-cost indexes make up two-fifths of the core index and tend to move slowly, since the leases that they are based on are typically negotiated once a year. That lag means housing costs could keep core CPI high for months, even though private-sector rent measures are declining.
Core services prices, which tend to persist once they start rising, rose at a one-month annualised rate of 9.9%, the sharpest rate since 1982. Prices for motor vehicle repair services rose 2.2% in September from the prior month. Veterinary services and daycare and preschool increased 2% last month
Mr. Adams said those figures reflected “the ripple effects of price shocks over the last year broadening across the economy.”
The Social Security Administration separately said Thursday that Social Security benefits would increase by 8.7% in 2023. The boost, calculated from a different version of the September CPI, is the highest in four decades.
The increase will translate to a sizeable income increase for around 70 million people, compared with workers who aren’t seeing wage growth that keeps pace with inflation, said James Knightley, chief international economist at ING.
Mr. Knightly said the benefits increase could put slight pressure on inflation next year.
Inflation accelerated last year as the U.S. economy recovered from the Covid-19 pandemic. Prices rose as strong consumer demand—stoked by lower interest rates and government stimulus—collided with constrained supply chains and pandemic-related shortages. Russia’s invasion of Ukraine this year further spurred inflation worldwide, hitting food, energy and other commodity prices.
The U.S. growth outlook has dimmed, and the higher interest rates are stoking fears of a recession. Gross domestic product, a broad measure of spending on goods and services, fell at an annual rate of 1.1% in the first half of the year, adjusted for inflation and seasonality.
The Fed is aggressively raising interest rates to slow price increases. Officials at the Fed’s September policy meeting expressed concern about the persistence of high inflation, minutes published this week showed.
Officials last month raised the benchmark federal-funds rate by 0.75 percentage point—their fifth increase since March—bringing it to a range between 3% and 3.25%, the most rapid pace of rate increases since the early 1980s.
Fed Chairman Jerome Powell said in late September that the central bank would continue to lift interest rates and keep them high until it is certain that inflation has been tamed. Nearly all Fed officials expect to raise their benchmark interest rate to between 4% and 4.5% by the end of this year, according to September projections.
“You don’t get inflation like this without a lot of things going wrong,” said Michael Gapen, head of U.S. economics at Bank of America. “Maybe the bumper sticker is: It’s not just up to the Fed to bring inflation down. We expect help from other areas including global commodity markets and a reversal in the relative shock to core goods prices.”
A deceleration in price increases for autos, furniture and other goods is key to putting inflation on a steady downtrend, Mr. Gapen said. There are signs that pressures created by supply-chain disruptions could be subsiding, helped by a consumer shift from spending on goods to services. Prices for core consumer goods remained flat from August to September as well, in part due to a drop in used-auto prices.
Food prices have continued to climb. Grocery prices increased 13% from a year ago in September, buoyed in part by a 30.5% surge in prices for eggs and a 24.2% increase in those for flour and mixes.
Kristin Curreri of Arlington, Mass., said high inflation is making it hard to manage finances since she got married in May 2021. She and her husband expanded their wedding guest list and increased their budget after Covid-related restrictions eased, leading to a credit-card balance.
“Inflation wasn’t something people were paying attention to at that point,” she said. “This was the first gathering people got to go to in a year, so I thought, ‘Well, let’s pay a little more and carry a little debt that I’ll then pay off.’”
Then prices started shooting up, with higher food costs particularly punishing. While Ms. Curreri said she has cut back on more-expensive items including organic chicken, she estimates that her overall grocery bill has gone up around 30% since 2021.
“With the cost of living having increased so much, I’ve basically been carrying a rolling four grand that I just can’t get rid of,” she said, referring to her credit-card balance.
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
While most U.S. workers are putting in fewer hours, men in the top 10% of earners cut back their time on the job the most, according to a new study
American workers have cut the number of hours they spend in their jobs since 2019, but no group has dialled back its time on the clock more than young, high-earning men whose jobs typically demand long hours.
The top-earning 10% of men in the U.S. labor market logged 77 fewer work hours in 2022, on average, than those in the same earnings group in 2019, according to a new study of federal data by the economics department at Washington University in St. Louis. That translates to 1.5 hours less time on the job each workweek, or a 3% reduction in hours. Over the same three-year period, the top-earning 10% of women cut back time at work by 29 hours, which translates to about half an hour less work each week, or a 1% reduction.
High-earning men in the 25-to-39 age range who could be described as “workaholics” were pulling back, often by choice, says Yongseok Shin, a professor of economics, who co-wrote the paper. Since this group already put in longer hours than the typical U.S. worker—and women at the highest income levels—these high earners had longer work days to trim, Dr. Shin says, and still worked more hours than the average.
The drop in working hours among high-earning men and women helps explain why the U.S. job market is even tighter than what would be expected given the current levels of unemployment and labour force participation, Dr. Shin says.
“These are the people who have that bargaining power,” Dr. Shin says of the leverage many workers have had over their employers in a tight job market. “They have the privilege to decide how many hours they want to work without worrying too much about their economic livelihood.”
The paper published by the National Bureau of Economic Research, which isn’t yet peer reviewed, suggests high earners were more likely to benefit from flexible working arrangements, which could be a factor in reduced work hours.
Before the pandemic, Eli Albrecht, a lawyer in the Washington, D.C., area, says he worked between 80 to 90 hours a week. Now, he says he puts in 60 to 70 hours each week. That’s still more than most men in America, who averaged 40.5 hours a week in 2021, according to federal data.
Mr. Albrecht’s schedule changed when he shared Zoom school duties for two of his young children with his wife. He’s maintained the reduced hours because it’s making his relationship more equitable, he says, and gives him family time.
“I used to feel—and a lot of dads used to feel—that just by providing for the family financially, that was sufficient. And it’s just not,” Mr. Albrecht says.
The downshift documented by Dr. Shin and his colleagues occurred as many professionals have been reassessing their ambitions and the value of working long hours. Emboldened by a strong job market, millions of Americans quit their jobs in search of better hours and more flexibility.
Overall, U.S. employees worked 18 fewer hours a year, on average, in 2022 compared with 2019, with employed men putting in 28 fewer hours last year and employed women cutting their time by nine hours, data from the U.S. Census Bureau’s Current Population Survey show. The average male worker put in 2,006 hours last year, while the average female worker logged 1,758 hours.
Separate data from the Census Bureau suggests that men with families, in particular, are working less. Between 2019 and 2021, married men devoted roughly 13 fewer minutes, on average, to work each day, according to the American Time Use Survey, which hasn’t yet published 2022 figures. They spent more time on socialising and relaxing, as well as household activities, according to men surveyed by the Census Bureau. The amount of time unmarried men spent on work changed little during that same period.
As high-earning workers in the U.S. cut back, low-wage workers increased their hours, according to Dr. Shin’s research. The bottom-earning 10% of working men logged 41 hours more in 2022, on average, than in 2019. Women in the lowest earning group boosted their hours worked by 52 last year compared with 2019.
While women work fewer hours than men, the unpaid labor they perform outside of their jobs has been well documented. Many working mothers take what’s termed a “second shift,” devoting more time outside work hours to child care and housework.
Maryann B. Zaki, a mother of three who has worked at several firms, including in big law, recently launched her own practice in Houston, giving her more control over her hours. She says she’s noticed more men in her field opting for reduced schedules, sometimes working 80% of the hours normally expected—which can range from 40 to more than 80 a week—in exchange for a 20% pay cut. For the average lawyer, that would amount to a salary reduction of tens of thousands of dollars each year; such arrangements were initially offered to aid working mothers.
Responding to new expectations of work-life balance may be particularly vexing for industries already facing staffing shortages, such as those in medicine. Dr. Lotte Dyrbye, the chief well-being officer for the University of Colorado School of Medicine, said she often hears from early-career physicians and other medical professionals who want to work fewer hours to avoid burnout.
These medical workers are deciding that to be in it for the long haul requires a day every week or two to decompress, Dr. Dyrbye says. But as staff cut back their hours, it costs medical organisations money and may compromise access to care.
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