The Department of Labor (DOL) recently announced that, over the past 12 months, the U.S. consumer price index (CPI) has risen to 8.5%—the highest annual increase in over 40 years.
By measuring costs for an array of goods and services—including gasoline, food, energy, furniture and cars—the CPI provides an indication of inflation and whether prices for everyday items will increase.
There are a number of potential contributing factors to the current CPI. These include ongoing supply-chain bottleneck issues, a dramatic increase in demand for goods and services following relaxed COVID-19 restrictions, and global market disruptions due to the Russian conflict in Ukraine.
To help combat rising inflation, the Federal Reserve has and will likely continue to raise interest rates through 2023. Economists are monitoring this closely for signs of a recession, which soaring interest rates can kick off.
Some economic experts predict that the 8.5% CPI will be the peak; however, others remain unconvinced. In any case, the effects of inflation will be felt for a while, even if the rate gradually decreases.
Moreover, while the CPI is generally viewed in terms of paying more for everyday goods, it can be interpreted another way: a drain on the value of worker wages. Put another way, the money employees are earning right now is worth less than it was a year ago.
More specifically, private-industry worker wages increased 5% in 2021 on average, according to the Bureau of Labor Statistics. Amid an 8.5% CPI, wages are not keeping up with the real cost of living.
All this is to say that employers should be sensitive to the realities of the current economy when determining workplace strategies. As such, employers may want to consider what this current market means for their compensation strategies. Or, employers can consider other ways to help workers cope with rising prices, be it through measures such as benefit offerings or flexible work options.
Currently, it’s unclear when pocketbooks may see relief from soaring inflation rates, and individuals should stay tuned for more developments from the Federal Reserve.
In the meantime, reach out to Barrow Group, LLC for workplace resources to help employees make the most of their dollars.
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