Inflation dipped again last month as expected by analysts to reach the smallest 12-month increase since May 2021, according to new data out Wednesday. But overall, cost of living is still running at a high pace, contributing to significant declines in employee financial and mental well-being.
The Consumer Price Index (CPI) for all items rose 5 percent for the 12 months ending in March, before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) reported April 12. That's down from the 6 percent annual gain seen in February and the 6.4 percent annual gain in January; it's also significantly below the 9.1-percent high notched last June.
On a monthly basis, the CPI rose 0.1 percent in March, seasonally adjusted, after increasing 0.5 percent in February.
Core inflation, excluding food and energy, rose 0.4 percent in March after rising 0.5 percent in February, the BLS said.
The index for shelter was by far the largest contributor to the monthly all items increase. This more than offset a decline in the energy index, which decreased 3.5 percent over the month as all major energy component indexes declined, according to the BLS. The food index was unchanged in March with the food at home index falling 0.3 percent.
Meanwhile, real average hourly earnings decreased 0.7 percent, seasonally adjusted, from March 2022 to March 2023, the BLS reported separately Wednesday. The change in real average hourly earnings, combined with a decrease of 0.9 percent in the average workweek, resulted in a 1.6 percent decrease in real average weekly earnings over this period.
Despite the improvement being made with consumer prices, progress is still slow, with inflation running significantly higher than the Fed's target rate of 2 percent. From 1960 to 2021, the average inflation rate was 3.8 percent per year.
Persistent high cost of living continues to take its toll on workers, contributing to heightened feelings of financial fragility, stress and mental anguish, according to recent reports.
MetLife data released last month, for instance, found a significant decline in employees' overall holistic health—incorporating physical, financial, mental and social health—with financial health in particular on a sharp decline. Just 55 percent of employees said they are financially well, although employers don't seem to understand the full scope of the problem: 83 percent said their employees are financially well.
Meanwhile, recent data from Telus Health, which compiles a monthly mental health index to gauge how employees are feeling, found that financial problems and high inflation are driving a significant decline in employees' mental health. Inflation continues to play out in other ways, including employees saving less, dipping into their retirement accounts and living paycheck to paycheck.
"Working Americans are feeling the rising cost of living and are increasingly worried about their financial future, especially when it comes to repaying debt and saving for retirement," said Telus Health Chief Growth Officer Juggy Sihota.