Well-above average inflation is still hurting workers, but new data released today shows that inflation is continuing its slowdown—positive news that could cause ripple effects in the workplace and beyond if inflation continues to cool.
The Consumer Price Index (CPI) for all items rose 6.5 percent for the 12 months ending in December, before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) reported Jan. 12. On a monthly basis, the CPI fell 0.1 percent in December, seasonally adjusted, after increasing 0.1 percent in November.
The index for gasoline was by far the largest contributor to the monthly all items decrease, more than offsetting increases in shelter indexes, the BLS said.
It's the latest month that inflation has slowed: The November CPI for all items rose 7.1 percent for the 12 months ending in November, before seasonal adjustment—a notable decrease from the 9.1-percent high notched for the period ending in June.
Slowing inflation could lead the Federal Reserve to reevaluate interest rate hikes and pivot to lowering interest rates—a move that may decrease the odds of the severe recession that some analysts are fearing. In other good news, the labor market remains strong. The Labor Department also reported that 205,000 workers filed for new unemployment benefits during the week ending Jan. 7, a decrease of 1,000 from the previous week's revised level. Weekly jobless claims are at their lowest level in four months.
Despite the cooling seen in the last two months of 2022, the inflation rate remains significantly above its multiyear average, as well as above the Fed's target rate of 2 percent. From 1960 to 2021, the average inflation rate was 3.8 percent per year.
The slowing of inflation isn't making its dent on employees just yet, however, as higher cost-of-living is shrinking the buying power of their take-home pay and causing many to shell out more money on housing, gas, groceries, medical bills and other expenses. It's also causing their savings—including retirement—to take a big hit.
Real average hourly earnings fell 1.7 percent, seasonally adjusted, from December 2021 to December 2022, the BLS reported today separately. The change in real average hourly earnings combined with a decrease of 1.4 percent in the average workweek resulted in a 3.1-percent decrease in real average weekly earnings over this period.
Research from Betterment at Work, a New York City-based financial services firm, recently found that employee financial health is on a downward trend, with 40 percent of employees rating themselves as financially stable, a 9 percent drop from last year. And more than one-quarter (28 percent) dipped into their retirement savings to pay for short-term expenses this year, according to the report, which surveyed 1,000 full-time U.S. employees.
Inflation, unsurprisingly, is the primary culprit driving employees to tap into their post-work savings, with 64 percent of respondents saying they have faced higher costs of living and 88 percent saying inflation and rising costs of living have notably increased their financial anxiety this year, that survey revealed.
Related Content
As artificial intelligence technology continues to develop, the demand for workers with the ability to work alongside and manage AI systems will increase. This means that workers who are not able to adapt and learn these new skills will be left behind in the job market.
A vast majority of U.S. professionals say students entering the workforce should have experience using AI and be prepared to use it in the workplace, and they expect higher education to play a critical role in that preparation.
Advertisement
An organization run by AI is not a futuristic concept. Such technology is already a part of many workplaces and will continue to shape the labor market and HR. Here's how employers and employees can successfully manage generative AI and other AI-powered systems.
Advertisement