After a year of soaring inflation, hitting a 40-year-high in June, cost of living is finally cooling, according to the new Consumer Price Index (CPI) released today. Although the CPI's smaller than expected increase is a glimmer of good news for workers, inflation's soaring trajectory over the past year still significantly trails workers' pay increases, causing ongoing stress about employees' ability to keep up with rising costs.
The Consumer Price Index (CPI) for all items rose 7.1 percent for the 12 months ending in November, before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) reported Dec. 13. It's the latest month that inflation has slowed: the CPI rose 7.7 percent in October, down from the 8.2-percent increase for the 12-month period ending in September and a notable decrease from the 9.1-percent high notched for the period ending in June.
Despite the cooling seen in the final CPI report of the year, 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.
On a monthly basis, the CPI rose 0.1 percent in November, seasonally adjusted, after increasing 0.4 percent in October.
The inflation report comes as the Federal Reserve is expected to raise interest rates Wednesday, an indicator of the Fed continuing to try to curb inflation's impact.
The latest CPI has big implications for employees: Soaring inflation has taken its toll on most factors of employees' lives, including their emergency savings, retirement contributions, and mental health. And of course it's taken a hit on their daily finances, with take-home pay being stretched thin as workers shell out more money for housing, groceries, medical bills, gas and other expenses.
Real average hourly earnings fell 1.9 percent, seasonally adjusted, from November 2021 to November 2022, the BLS reported today separately. The change in real average hourly earnings combined with a decrease of 1.1 percent in the average workweek resulted in a 3.0-percent decrease in real average weekly earnings over this period.
New data from Remote.co, a remote work resource firm that surveyed 1,100 global professionals in October, finds that the overwhelming majority of employees (80 percent) say their current salary is not keeping up with inflation, and the disparity is increasing their financial stress. Indeed, although employers plan to hike salaries more than usual—consulting firm Willis Towers Watson, for instance, finds that U.S. employers plan to boost salaries an average of 4.6 percent in 2023, up from 4.2 percent this year—pay increases are still significantly trailing cost-of-living, making the increases feel like they aren't going far enough for many employees.
Perhaps worse yet for employers, inflation is causing scores of employees to look for higher-paying jobs and take gigs on the side to earn extra cash, according to Remote.co. "For HR professionals already challenged with navigating a tight labor market amid a shifting global economy, the large-scale possibility of career changes may be particularly concerning," said Kathy Gardner, a spokesperson for Remote.co.