Saturday, December 17, 2016

Rising inflation and GOP wage suppression = bad combination

In addition to the monthly state jobs report, there was another bit of economic data that came out last week that caught my eye. The US Bureau of Labor Statistics said that inflation in the US is on its way up, largely due to the rising home and rent prices, and gas prices bouncing off their previously-low levels.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported [Thursday]. Over the last 12 months, the all items index rose 1.7 percent before seasonal adjustment.

The shelter and gasoline indexes continued to rise in November, and were again the main reasons for the seasonally adjusted all items increase. The shelter index advanced 0.3 percent in November, while the gasoline index increased 2.7 percent.
That 1.7% annual increase doesn't sound like much, but it's the largest 12-month jump in inflation in over 2 years. Even worse, prices have gone up 1.1% over the last 4 months, in contrast to actual declines in inflation last winter, so that annual figure is likely to climb well over 2% in the next few months.

In addition, while the rise in inflation is going on, workers' wages aren't getting the same bump. Another report released by the BLS on Thursday showed that workers actually fell behind in two ways in November.
Real average hourly earnings for all employees decreased 0.4 percent from October to November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from a 0.1 percent decrease in average hourly earnings being more than offset by a 0.2-percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings decreased 0.3 percent over the month due to the decrease in real average hourly earnings combined with no change in the average workweek.
Some of the decline in average hourly earnings was a logical mini-correction from the 0.4% increase for October. But some of that October increase was also eaten up by inflation last month, and if you look at the year-long trend, you'll see that prices have gone up compared to this time last year, but the wage increases are no different.

Average hourly earnings, 12-month change
Nov 2015 +2.4%
Nov 2016 +2.5%

Average weekly earnings, 12-month change
Nov 2015 +2.1%
Nov 2016 +2.2%

Real hourly earnings, 12-month change
Nov 2015 +1.9%
Nov 2016 +0.8%

Real weekly earnings, 12-month change
Nov 2015 +1.7%
Nov 2016 +0.5%

I don't see a lot of indications that the trend of limited wage increases and rising prices will reverse soon, especially in Wisconsin. Gasoline prices have continued to climb in December (I paid $2.09 this morning) and with oil futures jumping near 20% in the last month, that won't go down. But WMC and their WisGOP puppets are trying to suppress wages further, and Assembly Speaker Robbin' Vos openly promoted this suppression yesterday in a press release bragging about the GOP Legislature's "accomplishments".
The first of 16 Assembly GOP wins is being released today. The implementation of prevailing wage is the first accomplishment highlighted. This reform that eliminates a set wage for local government construction projects officially goes into place on January 1, 2017.

“As one of the leaders who helped shepherd through the reform, more taxpayer dollars can be saved by eliminating the prevailing wage in state projects,” said Speaker Vos. “A full prevailing wage repeal should be considered as part of a comprehensive transportation funding package.”
So it seems more likely that instead of "making America great again" for workers, the next 2 years under Trump and WisGOP control are more likely to make things worse. Now combine the mediocre wages with the recent spike in interest rates lead to increased mortgage payments and a popping of the current mini-bubble in housing, and you've got a recipe for the middle class to fall further behind the richest Americans, with inequality crippling the economy even more.

Which brings me to ask a simple question for many of you blue-collar white Wisconsinites. How's that "voting Republican" solution going to work for you when it comes to paying your (increasingly more expensive) bills?

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