This morning’s inflation report and last week’s jobs report are yet another reminder that President Biden’s policies are failing the American people. Here are the key take-aways from these reports and President Biden’s remarks yesterday:
(1) At 8.3% year over year, inflation remains stubbornly near 40-year record highs.
(2) Wages are not keeping up with prices; the average American has lost about $1,350 in purchasing power due to the inflation tax.
(3) The Biden Administration remains clueless at best, or is actively misleading at worst, about the role of its own reckless fiscal policy in the current inflationary surge—too much demand from government overspending and too little supply from labor shortages and supply chain disruptions exacerbated by the administration’s anti-work and anti-energy policies.
According to the Bureau of Labor Statistics, the Consumer Price Index for all urban consumers (CPI-U) increased 8.3% over the last 12 months, while hourly earnings have grown just 5.5%. Meanwhile, producer prices increased 11.2% year-over-year, according to the data shown in figure 1, suggesting that inflation troubles may persist. American workers continue to fall further behind, and the president’s only solution is to double down on big government socialism that generated these outcomes. These inflationary effects are particularly hurtful to lower-income Americans and seniors living on fixed incomes.
Food prices rose 0.9% in April and have risen 9.4% over the last year. While gas prices moderated in April, they have risen 43.6% in the last 12 months. The prices of new vehicles rose another 1.1% last month, resulting in price increases of 13.2% over the last year. Used car prices have been up 22.7% over the last 12 months. The cost of shelter rose 0.5% last month, totaling 5.1% for the last 12 months. Over the last 12 months, every category of goods and services is up. The medical care commodities category has seen the lowest increase at 2.1%, and medical care services have risen 3.5%. Nearly every other category has seen price increases in excess of 5%.
Wages and salaries have not kept up with these price increases, as seen in the consistent negative real wage growth in figure 2. Average hourly earnings from nonfarm payrolls rose just 10 cents in April, resulting in an increase of 5.5% for the last 12 months. In total, Americans have paid an inflation tax of nearly $1,350 in reduced purchasing power since this inflationary surge began last year. Employment is still 1.2 million workers below the levels observed prior to the pandemic. Despite the vaccines generated from Operation Warp Speed that began being administered 18 months ago, many Americans have still not returned to the workforce, and the economy is still seeing shortages. Such shortages have led to price increases, worsened by the excessive spending from the American Rescue Plan in 2021 and the Federal Reserve’s accommodative monetary policy. Seemingly blind to the inevitable inflation that would result, the Federal Reserve’s delayed response means they are behind in maintaining price stability. They are now raising interest rates at an accelerated pace that may very likely lead to recession.