Inflation Eased at Start of the Year, But Employer Pressures Remain

Inflation eased more than expected to kick off 2026, but employers and employees continue to grapple with financial pressures.

The consumer price index (CPI) increased 0.2% on a seasonally adjusted basis in January and rose 2.4% year-over-year, the BLS reported Feb. 13. Economists predicted that inflation would rise 2.5% over the year. That’s lower than the 0.3% monthly rise in December and the previous report’s annual inflation figure of 2.7%. 

The index for shelter rose 0.2% in January and was the largest factor in the all items monthly increase, the BLS reported. The food index increased 0.2% over the month as did the food at home index, while the food away from home index rose 0.1%. These increases were partially offset by the index for energy, which fell 1.5% in January.

Core inflation, which excludes volatile food and energy prices, rose 0.3% in January and 2.5% annually, following the 2.6% annual increase in December.

There had been some concern that the impact of President Trump's tariffs would put more upward pressure on the Core CPI value, but that pressure is not currently expected to drive any consistent upward trend, said Justin Ladner, senior labor economist at SHRM. “It is considered very unlikely that the report will meaningfully impact the Fed’s thinking about future interest rate cuts,” he said.

Although inflation is trending down, financial pressures remain for both employees and employers.

Roughly one-third of Americans think their personal finances will worsen in 2026, according to Bankrate’s recent Financial Outlook Survey. That’s the highest level of pessimism since 2018. Comparatively, 23% thought their finances would worsen in 2025. Continued high inflation was the top reason cited by those who expect their personal finances to get worse in the coming year.

And recent research from the Employee Benefit Research Institute found that employer discomfort at their workers’ financial well-being reached a new high: 48% rated their concern at 9 or 10 on a scale of 1 to 10 in 2025, compared with 43% in 2024 and just 39% in 2023.

Inflationary pressures are forcing employers to navigate rising labor costs, increased operational expenses, and heightened employee demand for higher wages.

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Real Earnings Ticked Up

Meanwhile, real average hourly earnings for all employees increased 0.3% from December to January, seasonally adjusted, the BLS reported separately today. That result stems from an increase of 0.4% in average hourly earnings combined with an increase of 0.2% in the CPI. From January 2025 to January 2026, real average hourly earnings increased 1.2%, seasonally adjusted.