Labor report indicates persistent inflation
Chairman of the Federal Reserve nominee Jerome Powell / Getty Images
Labor Report Shows Inflation Isn’t Going Away
Prices rose again last month, according to a Tuesday report from the Bureau of Labor Statistics, the latest sign that inflation remains a persistent issue as President Joe Biden seeks reelection.
The Consumer Price Index for all items increased 0.4 percent from January to February, more than the previous month’s rise of 0.3 percent, the bureau said. Year over year, prices were up 3.2 percent before seasonal adjustment, which was also greater than January’s increase of 3.1 percent.
Removing more volatile food and gas prices to get ”core” inflation, costs rose 0.4 percent for the month and 3.8 percent for the year. Both of those numbers were higher than economists’ projected totals of 0.3 percent and 3.7 percent, according to Yahoo Finance.
Tuesday’s report makes it less clear that inflation is falling to the Federal Reserve’s target of 2 percent annually. Chair Jerome Powell has said he hopes to cut rates in 2024, and some projections indicated that the central bank would do so this month. That forecast has tempered, however, with the Federal Reserve now expected to cut rates in June.
Economists told Yahoo Finance and the Associated Press that, while Thursday’s report is not ideal, there is underlying evidence that the economy is still healthy.
In the months leading up to February, inflation was higher than expected in both January and December—though the government later revised the December numbers, making them lower than first reported.
Record Inflation Impacts Biden’s Approval Ratings
Biden has seen his approval ratings suffer in the wake of record inflation, which peaked at 9.1 percent in June 2022, during his administration. Polls have found Americans are pessimistic about the economy, which they described as one of the biggest problems facing the country in a Gallup poll last month.
Biden’s approval rating is 40 percent and his disapproval rating is 55.8 percent, according to the RealClearPolitics polling average.
How has the latest labor report raised concerns about the persistence of inflation?
Owell and other Fed officials have repeatedly stated that they expect the recent uptick in inflation to be temporary, resulting from temporary supply chain disruptions and pent-up consumer demand. However, the latest labor report raises concerns that inflation may not be going away as quickly as hoped.
The Consumer Price Index (CPI) is a widely used measure of inflation, and it showed a 0.4 percent increase from January to February. This is higher than the previous month’s rise of 0.3 percent, indicating that inflation is not only persisting but also accelerating. On a year-over-year basis, prices were up 3.2 percent before seasonal adjustment, exceeding January’s increase of 3.1 percent.
To get a better sense of underlying inflation trends, economists often look at “core” inflation, which excludes the more volatile food and gas prices. Even when considering core inflation, the report revealed a 0.4 percent increase for the month and a 3.8 percent increase for the year, surpassing economists’ projections of 0.3 percent and 3.7 percent, respectively.
These higher-than-expected inflation numbers suggest that the Federal Reserve’s target of 2 percent annual inflation may not be easily achieved. Chair Jerome Powell and his colleagues at the Fed have emphasized their commitment to maintaining price stability and supporting the economy’s recovery from the pandemic. They have described the recent inflationary pressures as transitory and have signaled their intention to keep interest rates low and asset purchases steady until substantial progress has been made toward their employment and inflation goals.
However, the labor report’s data on rising prices could complicate the Fed’s plans. Persistent inflation can erode purchasing power, reduce consumers’ standards of living, and pose challenges to businesses’ profitability. If businesses face higher costs due to inflation, they may need to increase prices, leading to a self-perpetuating cycle of rising prices and potentially stunting economic growth.
Inflation is also a critical political issue, particularly as President Joe Biden seeks re-election. Higher prices can negatively impact voters’ perception of the economy and their confidence in the government’s ability to manage it. Therefore, the administration is likely to closely monitor and respond to inflationary pressures.
As the labor report shows, inflation isn’t going away, at least not yet. The Federal Reserve will need to carefully assess the situation and consider whether additional measures are needed to address this potential threat to the economy’s stability. Meanwhile, businesses and consumers should be prepared for the possibility of continued price increases and adjust their strategies accordingly.
While it remains uncertain how long the current inflationary pressures will last, it is crucial to closely monitor economic indicators and policy responses. The path to a sustainable and balanced economy requires continued vigilance and adaptation to address the complex challenges posed by persistent inflation.
" Conservative News Daily does not always share or support the views and opinions expressed here; they are just those of the writer."
*As an Amazon Associate I earn from qualifying purchases
Now loading...