Inflation Rate Dips, Still Outpaces Average Wage Gains

Stephen Miller, CEBS By Stephen Miller, CEBS November 10, 2022
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Inflation Rate Dips, Still Outpaces Average Wage Gains

This article was updated.

Consumer inflation in the U.S. has slowed its pace but remains well-above its long-time average, leaving workers' pay raises still trailing rising costs.

The Consumer Price Index (CPI) for all items rose 7.7 percent for the 12 months ending in October, before seasonal adjustment, down from the 8.2-percent increase for 12-month period ending in September and a notable decrease from the 9.1-percent high notched for the period ending in June, the U.S. Bureau of Labor Statistics (BLS) reported on Nov. 10. 

The inflation rate remains significantly above its multiyear average. From 1960 to 2021, the average inflation rate was 3.8 percent per year.

"The monthly and annual rates of increase in the Consumer Price Index both came in lower than expected [and] the lowest since January. But if this constitutes improvement, we've set a very low bar," tweeted Greg McBride, a senior vice president and the chief analyst at Bankrate, a consumer financial services company based in New York City.

On a monthly basis, the CPI rose 0.4 percent in October, seasonally adjusted, the same increase as in September. Excluding the volatile food and energy sectors, the "core" CPI rose 0.3 percent in October, compared with a 0.6 percent increase in September.

Year over year, the core CPI rose 6.3 percent from October 2021 to October 2022, down from the 6.6-percent annual increase through September. The slower pace of inflation "points to some easing in the cost of living pressures that hit the poor particularly hard," tweeted Mohamed A. El-Erian, chief economic adviser at Allianz, an international financial services provider.

Slowing inflation could lead the Federal Reserve to begin easing its interest rate hikes, improving the odds for avoiding a severe recession, El-Erian and others noted.


Inflation-Adjusted Earnings

Above-average inflation means the buying power of workers' take-home pay has been shrinking. Real (inflation-adjusted) average hourly earnings fell 2.8 percent, seasonally adjusted, from October 2021 to October 2022, the BLS separately reported.

The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 3.7-percent decrease in real average weekly earnings over this 12-month period.

Addendum: Wholesale Price Increases

Producer prices are a leading indicator for the prices that consumers eventually pay, and on Nov. 15 the BLS released the October Producer Price Index (PPI), showing that wholesale prices rose 0.2 percent in October, seasonally adjusted, after rising 0.4 percent in September.

The PPI was up 8.0 percent in October year over year, down from the 8.5-percent increase for the 12-month period ending in September, providing another indication that inflation may be moderating but remains well-above average.

Producer prices less foods, energy, and trade services advanced 0.2 percent in October following a 0.3-percent rise in September. For the 12 months ended in October, the PPI less foods, energy and trade services increased 5.4 percent, down a tad from the 5.6-percent year over year increase logged in September.


Related SHRM Articles:

2023 Tax Bracket Changes Could Increase Workers' Take-Home Pay,SHRM Online, October 2022

2023 Social Security Wage Cap Jumps to $160,200 for Payroll Taxes, SHRM Online, October 2022

Keeping Pay Structures Current in a Volatile Market, SHRM Online, October 2022

Wage Growth at Small Businesses Stays Strong, SHRM Online, September 2022

US Employers Boost Pay Budgets Despite Recession Concerns, SHRM Online, August 2022

Related SHRM Resources:

Salary Increase Projections 2023 (and 2022), SHRM Express Request

[Need real-time, HR-reported compensation reports? Check out the SHRM Compensation Data Center]




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