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Inflation Eases Slightly in April

A woman is standing in the kitchen looking at her phone.

​Inflation fell slightly in April, hitting the slowest annual rate in two years, according to new figures out today.

The Consumer Price Index (CPI) for all items rose 4.9 percent for the 12 months ending in April, before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) reported May 10. That's just under the 5 percent year-over-year notch it reached in April.

On a monthly basis, the CPI rose 0.4 percent in April, seasonally adjusted, after increasing 0.1 percent in March.

The index for shelter was the largest contributor to the monthly all items increase, followed by increases in the index for used cars and trucks and the index for gasoline, the BLS reported. The increase in the gasoline index more than offset declines in other energy component indexes, and the energy index rose 0.6 percent in April. The food index was unchanged in April, as it was in March. The index for food at home fell 0.2 percent over the month, while the index for food away from home rose 0.4 percent.

"Inflation is down from crisis levels, but not back to normal," tweeted Justin Wolfer, a professor of public policy and economics at the University of Michigan.

Core inflation, excluding food and energy, rose 0.4 percent in April after rising 0.4 percent in March, the BLS said.

Meanwhile, real average hourly earnings decreased 0.5 percent, seasonally adjusted, from April 2022 to April 2023, the BLS reported separately today. The change in real average hourly earnings combined with a decrease of 0.6 percent in the average workweek resulted in a 1.1-percent decrease in real average weekly earnings over this period.

Although inflation has eased from its scorching hot pace—it hit a four-decade high last year of a roughly 9 percent annual rate—its persistent elevation continues to drive increased rates of financial stress and financial fragility and lower rates of confidence in savings and retirement.

Data out last week from the Employee Benefit Research Institute and research firm Greenwald Research, for instance, found that inflation is driving steep declines in workers' confidence about their post-work savings. Both workers' and retirees' confidence in having enough money to live comfortably throughout retirement significantly dropped from 2022's numbers, falling to 64 percent from 73 percent among workers and to 73 percent from 77 percent among retirees.

And a survey by FinFit with Salary Finance released May 1 found that financial stress is on the rise and now impacting about half of employees—no matter what income bracket they're in. Meanwhile, four out of five workers said that the rising cost of consumer goods over the past year impacted them, that report found.

Employers are offering some relief in the form of higher pay for their employees: Data from consulting firm Mercer found that employers are shelling out bigger pay boosts to employees in 2023 than they have in years. U.S. employers reported 2023 annual merit increases have averaged 3.8 percent, while total compensation—which includes merit awards as well as all other types of compensation increases impacting base pay, such as promotional, cost-of-living and minimum wage—increased by 4.1 percent.

But employees are still expecting higher wage increases as a result of high cost of living, some reports indicate. The overwhelming majority of workers (83 percent) expect a raise in 2023, and, on average, they foresee an 8.3 percent uplift, according to the ADP Research Institute's annual global survey of more than 32,000 workers, released last month.

"Heightened employee expectations around pay increases is likely in part driven by the global macroeconomic environment we're currently facing," Nela Richardson, ADP's chief economist, recently told SHRM Online. "Workers everywhere are trying to manage their personal finances through high inflation and the high costs of living. Whereas U.S. workers were once expecting pay raises between 2 percent and 3 percent, in line with the pace of inflation at the time, they're now expecting pay growth over 6 percent, which is in line with current inflation levels."


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