Inflation and Wages Continue to Climb Rapidly, in Bad News for the Fed

Oct 28, 2022 · 52 comments
Mark (L.I.)
All major companies must scale down their profit margins. They can’t expect the people to pay for their ridiculous high expectations.
yulia (MO)
Time for tax increase
Socrates (Downtown Verona, NJ)
In related news.... Wages Continue to Climb Rapidly, In Good News For Average Americans.
Pete (Idaho)
Fascinating how the Fed couldn't give a rip when executive compensation goes up rapidly. The whole deal is rigged.
Steven Wolfson JD, PhD (Dallas TX)
To quote my macroeconomics professor: “Prices are sticky.”
MIKEinNYC (NYC)
When you raise the price of money, and almost everyone borrows money to finance homes, businesses, and by using credit cards, what do you expect? Dump Powell.
Jason W (Somewhere, USA)
Folks, nothing to see here. It's transitory.
metrocard (Elsewhere, NM)
American Express is seeing healthy behavior right now because everybody is "revenge spending" their savings. "The personal savings of Americans have plunged this year, hitting $629 billion in the second quarter of 2022, according to the Federal Reserve Bank of St. Louis. That’s down from $1.98 trillion in the second quarter of 2021 and from $4.85 trillion in the second quarter of 2020, when it was boosted by COVID-related government cash. But it’s also down from $1.41 trillion in the second quarter of 2019, before the coronavirus pandemic shut down the economy and led to a wave of government benefits." https://www.marketwatch.com/story/americans-personal-savings-have-fallen-off-a-cliff-how-to-boost-your-savings-in-case-of-a-looming-recession-11666722275
ekalb1 (dsm)
This economic quagmire we are in is unique. The far reaching impacts of the Covid Pandemic which includes more than the Chinese factory shutdowns, the clogged ports, the War on Ukraine, the natural gas problems in Europe, the oil & gas price hikes inflicted by Saudi Arabia and OPEC, and the near endless list of secondary causes of inflation, are the real contributors to inflation. Plus Corporate Greed. The Democrat Stimulus monies for us peasants and working class businesses for coping with the pandemic was not the cause of inflation. There was no inflation with the $2.5 billion tax relief that Republicans gave their rich buddies. Harvard's Larry Summers was the Town Crier/Economic Arsonist that ignighted the malestrom of greed. He said the Stimulus would cause inflation. Businesses began raising prices without incuring higher costs. Summers gave them a License to Gouge. He was the master mind of Great Recession fix job that only helped the big banks and left the millions of us to financial hardship and ruin. His prescription- 'feed the rich, the rest will survive'. CA Congress woman Katie Porter can be seen on youtube addressing inflation in a U.S. House hearing. She is bringing ov the facts and the truth about inflation being corporate greed. This is a long term problem. Electing Republicans will not solve inflation. It will be a different show to entertain and frustrate us while the world, the war, the pandemic, the Gougers, the polititians and the endless victim stories
tim (NYC)
Goodbye tax-and-spend Democrats, hello fiscally-conservative, law-and-order (that means border-control) Republicans
Donna Chang (NYC)
Let’s give more free checks so people don’t need to work and produce less stuff
Woof (NY)
Too complex a topic to analyze in the space allowed for a comment. Bottom line, though is the Fed acted incompetently For an informed view, sent to me today by highly knowledgeable market analyst click on below link https://www.mauldineconomics.com/download/global-macro-update-transcript-vincent-deluard As to the competency of the Fed: It is interesting to compare the education of Powell with that of who runs the Peoples Bank of China, a country where inflation Sept 2.8% and yr to yr 2.1% 2022 per The Economist Intelligence Unit amd Japan where inflation is 3% Sept and 1.8% yr to yr Yi Gang (PBoC) studied at Beijing University then at Hamline University in Saint Paul, Minnesota then obtained his Ph.D in Economics from the University of Illinois, with a dissertation on statistical model selection methods. Haruhiko Kuroda (BOJ) studied law at the University of Tokyo than studied economics at Oxford University UK Powell is a lawyer
Anand (Great Neck, NY)
I like graphs, data and trends more than a verbose article which fails to provide even a smattering of it. I trust expert with data more than experts with opinions. No wonder there has been such a disappointment about NYT's economic reporting.
TL (CT)
Bidenflation/Harriscession 2022 They voted blue, now it's boo hoo hoo... We get one shot to fix this madness at the polls in ten days. Americans deserve better than the failed policies and incompetence we are experiencing in D.C.
AKJersey (New Jersey)
COVID disrupted the international supply chains, creating inflation around the world. Putin’s war against Ukraine also disrupted the supply chains, further contributing to inflation. The solution to international inflation is not raising interest rates to create a worldwide recession. Instead, the solution is to defeat COVID and defeat Putin!
Mark McIntyre (Los Angeles)
If you want someone to blame, look no further than Vladimir Putin for imploding the global economy. Thanks to the strong U.S. dollar we are doing so much better than the rest of the world. If inflation was as bad as in Turkey, Argentina and other countries, Americans would be marching (or worse) in the streets.
fact or friction (maryland)
The sharp rise in inflation was caused by: a) during the peak of the pandemic, supply shortages due to production lines being shut down, b) as the pandemic eased, every company trying to ramp back up and hire workers but there weren't enough workers to go around, and c) OPEC and oil companies gouging everyone by pushing oil and gasoline prices way up, and using the Russian invasion of Ukraine as a bogus pretext. All of those things are easing now, in part due to major policy actions by Biden and the Dems in Congress. It takes awhile for things to work through the economy. As such, the call now should be to be patient. The Fed sensationalizing things and continuing to jack up interest rates, in the end, will very likely be seen as over-correction. Meanwhile, the economy remains fairly strong. GDP is up again, and employment is at an all-time high. Yet, the MSM, including the NYT, keeps harping on how terrible everything is. Yeah, things aren't ideal. But, they're evening out now. And, keep in mind the pandemic we've just been through. It was challenging, obviously, in so many ways -- and unprecedented. Arguably, things are a heck of a lot better now with the Dems in control for the last couple of years versus if Trump and the solution-void Republicans had been in power the last two years. All they have to peddle is trumped up grievances and hate. I'm voting all blue this election. There's too much at stake, starting with our democracy.
Ray Finch (Lawrence, Kansas)
Walking through the grocery store is like visiting a museum; one can see all the food, but you can’t afford to touch. Even the marked-down aisle is beyond the wallet of many.
TM (San Francisco, CA)
This article make it seem like the fed has things under control. This is classic sign of entrenched inflation and inflation expectations. Just look at the current housing market crash a sign of what’s going to happen…
Judi (North Carolina)
With no credentials to be a financial analyst, I have found consistence and clarity in Jerome Powell’s strategy: he and his board will consider other actions (lowering interest rates) when Inflation cools. The second thing has not happened, and the Fed is not the enemy. Per the article, big spenders are the problem. Maybe you and I fit into this category, as thousands of others wonder where payment for their next utility bill is coming from. They are not the ones zooming around in monster SUVs, remodeling the old kitchen and planning to fly here and there.
Eknath (NYC)
The savings rate data doesn't include income from capital only wages. The top decile often earns as much in capital income as in wages. And accounts for 20% or more of spending. So don't count on spending to slow until houses and stocks decline more than they have and until more management workers are let go. That printed money continues to circulate.
Austin Ouellette (Denver, CO)
Here’s how every recession or economic crisis works: Something is hurting the wealthiest Americans. Inflation, or recession. Congress, funded as they are by the wealthiest Americans, devise a strategy to bail out their rich friends, at the expense of everyone else. In this case, working class Americans are actually okay. Wages are basically, keeping up with the current inflation about as well as they have been for the past 30 years. Which is to say, could be better, but could also be worse. The wealthy on the other hand, are being decimated in a volatile market. So? They’ve asked their best buds in Congress to force a catastrophic recession which will cause millions of working class Americans to lose their jobs and their homes, destroying tens of millions of Americans’ lives, NONE of whom will receive a bailout, all the while the corporations and wealthy execs will receive a big fat government check. Then, as the dust settles, those same wealthy people will swoop in, purchase all those foreclosed assets, and rent those same assets back to the same Americans who were kicked out of those homes and apartments only months prior. The fed does NOT have to increase interest rates and cause a recession. In fact, doing so is the OPPOSITE of helping working class families. But they’re going to. Because the rich people said so.
Hobbes (Mead, CO)
"After stripping out food and fuel..." Food and fuel are crucial, and the practice of stripping out these factors is purely an effort to keep the estimates of inflation low. If we want to lower inflation, the solution is simple: put price controls on any industry with abusive profits or progressively tax it enough to remove those abusive profits. Oh, I forgot, Citizens United cemented the control of corporations on our legislature. So the solution will remain the same: cause a recession which will harm the lowest paid workers.
A Jaundiced Eye (Middlesex County, CT)
I've read all the comments and not one mentions the REAL reason for "wage" inflation: Productivity. If your boss gives you a FIFTY percent raise and you produce 50% more widgets, there is NO inflation. The chief cause of today's inflation is unskilled workers, in low-productivity industries (fast food, travel & hospitality) getting automatic increases (minimum wage hikes). If you're a front desk clerk who checks in 50 people a night, you can't start checking in 75 if they show up!
anonymous (somewhere)
you base this on what, exactly? at my work, the number of individuals we service has rapidly increased while our staff has declined precipitously weird thing is, I've also lost 15 percent of my real salary in just two years, because I'm a fed and the government isn't keeping wages for is workforce anything close to inflation. which is why the federal service is set to hollow out miserably in the next few years
Brody (NYC)
The Biden administration is the gift that keeps on giving. And we'll be feeling their gifted inflation for some time. Let the record show that inflation began to spike in the United States in April 2021. That's precisely one month after the Democrats' excessive $1.9 trillion boondoggle known as the American Rescue Plan began to dump money into a recovering economy with tight supply chains. What could go wrong? And the Democrats wonder why nobody trusts them on the economy.
D.A.Oh (Middle America)
Good thing Kevin McCarthy's sorta plan was previewed by Liz Truss' failed economic policy. Now we can go vote knowing that Republicans have no plan to make anything better, whether it's fiscal chaos, removing more of our rights, suppressing more voters, or giving aid and comfort to their White Savior, Putin.
ekalb1 (dsm)
The Democrats Stimulus Monies did not cause inflation any more than the $2.5 trillion tax breaks the Republicans gave their rich pals. It was unsound thinking by former Sec. of Treasury, Larry Summers. It gave burinesses a License to Gouge. And boy, they sure have!
MB (Anywhere But Here)
Until our corporate overlords, who are raking in profits, get a GOP-led tax break, inflationary pain will continue.
Unconditional Conditioner (Uranium-Bator)
4 the first time in 40 plus years, there is at least a semblance of parity between the working class poor who 3 years ago were making $7.40 / hr in many states and the owners class. The working class has been voting with their feet, and you won’t find any jobs out there less than $11-12/hr.
Rocky (Mesa, AZ)
The FED and others are focusing too much on the increase in wages and not enough on corporate profits. Average real wages, adjusted for inflation, today are little higher than they were 50 years ago. But corporate profits have increased from about $400 billion in 2000 to $3.1 TRILLION in 2021 - an increase of almost 8 times - or 800%., as shown on this Federal; Reserve data graph as shown here: https://fred.stlouisfed.org/series/A446RC1Q027SBEA# Meanwhile, real average wages have gone up 10% in total over the last 70 years, or less than 0.2% per year: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ With no significant 50-year increase in wages (despite productivity or average output more than doubling) and a gargantuan increase in profits, why is the FED so concerned about wages? We should be more concerned with massive inflation in profits and the impact they have on prices and the national inflation rate. The FED is trying to slow down the economy to fight inflation even though it will put underpaid workers out of work, while corporations keep raising prices to increase profits. Our country already has a major problem with income and wealth inequality, and it continues to get worse.
Earl (W)
I’m a blue collar worker. I bristle when people who make six figures complain about wages going up. The american working class has been exploited and is currently underpaid. We are not to blame for inflation, that’s on our corporate bosses.
Chris (Jersey City)
The 2.2 percent number over the decade pre pandemic was historically low, and some would argue, too low. If the number is now at 5% I guess that does not seem that bad to me under the circumstances; one could be forgiven for thinkling that it would be at 7 or 8 given all the hysteria out there. The Times' coverage on these issues leans towards the pessimistic side, as when the growth numbers the other day were 2.6% year on year and that was considered too slow, though in fact it was an improvement.
TB (New York)
After more than a decade of reckless easy money policies that distorted capitalism beyond recognition, and made a mockery of the price discovery process for virtually every conceivable asset, the Fed has effectively lost control of the economy. This is manifested in the fact that it is, right now, being taunted by "Mr. Market" on Wall Street, who is saying to the Fed, "I categorically reject your strategy for using wealth destruction to help fight inflation by bursting the stock bubble. You seem to forget who is actually in charge here, and who works for whom. Now get out there and give some speeches about how you're going to pivot soon, as ordered. Also, start moving the goalposts from that silly 2% inflation target of yours. And, finally, you'll step away from that punch bowl if you know what's good for you". Stunning, really. And the wealth effect will only force the Fed to continue raising rates not until "something breaks", but until "everything" breaks.
Allen (Montreal canada)
@TB You are a very intelligent person …perfect analysis and very well said … bravo ..exactly what i was thinking …
Ayzed (Malaysia)
People today are generally quite different from the 1970s. They don't really plan to get married or have families (or plan to have them later), and after being locked down for two years, expect that life is even shorter and more uncertain than they previously thought. A lot more women have a lot more money now too. Things are just... different. Therefore, spending patterns too.
Tournachonadar (Illiana)
Why do we have the archaic and ineffectual Fed, a relic of the 1905 William Howard Taft administration? Because Ummurica’s real religion is worshiping the almighty dollar. And that irrational devotion blinds its adherents to the actual value of money, and financial acumen. The Fed is not now, nor has never been, the best and brightest economists. They’re bureaucrats with an agenda invidious to the little people but friendly to the plutocrats.
Redrocker (baltimore)
@Tournachonadar What do you suggest then professor?
BG (Ohio)
Why is this "bad news for the Fed"? This actually makes it far easier for the Fed to defend their tighter money policy, when called to testify or when accused of causing pain for average Americans. It's bad news for heavily indebted people. Not for the Fed.
MIKEinNYC (NYC)
@BG If anything this shows the Fed's tighter money policy to be a painful failure.
George S. (NYC)
The evidence continues to mount that for the first time in many decades we are facing "Wage-Based Inflation". An economic phenomenon more found in the textbooks than experienced. Not sure what tools the Fed can deploy when dealing with this. Now -- where did I put that old Samuelson Econ 101 textbook?
Chris (Jersey City)
@George S. wage growth is not keeping up with inflation. Also, corporate profits are at a 72 year high this year, which tells you what is going on. Gouging, in most cases.
George S. (NYC)
@Chris The millions of us Americans with 401(k) plans and IRA accounts invested in corporate shares are in favor of corporate profits. What's not to like?
jay (Denver)
Wage growth is bad, it must be slowed. We have been assured. The article does a very poor job conveying that wage growth has slowed dramatically over the last 3 months and trails inflation. The article appears to want readers to assume that wage growth is responsible for inflation and wage growth is dangerously out of control. But don't worry about the details, wage growth is bad. We have been assured.
Megan Broh (Portland OR)
And in other headlines buried further in the news, Shell and Exxon report record billions in profit. Raising interest rates hurt home buyers, sellers, anyone with a 401k…. Not usually denting the big guys and big cos. The Fed needs to take a breather.
Darth Vader (Cyberspace)
@Megan Broh: The problem is that the Fed has only knob to turn, so they turn it. Other knobs (eg, taxes) are the responsibility of other (unfortunately, irresponsible) parties.
Aaron (Ohio)
September numbers that were high 10 days ago unchanged since they are the exact same numbers. Going to report on them again tomorrow?
Jacob Nataki (California)
If you want another view instead of blaming workers for all the problems in the world search for. Katie Porter PROVES How Corporate Greed Led to Inflation I'll simplify. If profits are up which they are. That means you are being gouged. If there was true inflation their profits would be static or declining. They are not. The lie is wages are causing this. That is why people consider certain media corporate media. Blaming wages for all of this is about attacking labor to keep costs as high as possible and workers as poor as possible.
MH (Philadelphia)
In economics classes, we learn that companies should always charge the highest price a consumer is willing to pay. "Corporate greed" is simply a red herring to distract from the fact that the level of demand we are seeing will not abate without further price increases.
Rocky (Mesa, AZ)
@MH "In economics classes, we learn that companies should always charge the highest price a consumer is willing to pay. " Yes, we see how patents allow drug companies to charge sky-high prices for some drugs that patients cannot do without, making enormous profits, and how oil companies with oil reserves make out like bandits when Russia and OPEC push up the world price of oil and therefore gasoline. How expensive does food have to be before you go hungry? How about fuel before you can't drive to work? It's particularly nice if companies take advantage of the expectation of price increases to increase their own prices just to make more profits. With just a few companies controlling many markets, they are smart enough to realize they can all increase prices, lose no customers, and make huge profits. Corporate profits are soaring right now. But we should do nothing about that because that is the free market at work. Real wages have increased little in the last 60 years while corporate profits have soared. But I guess you think that is OK because it is the "free market" at work.
Brody (NYC)
@Jacob Nataki Katie Porter did not prove anything other than that the Democrats will go to great lengths to obfuscate their role in goosing inflation. It is the Democrat's excessive stimulus, namely the boondoggle known as the $1.9 trillion American Rescue Plan, that overheated our economy and contributed to inflation. Nearly every noteworthy economist now concedes this point.
Scott (Texas)
Not enough policy lag time has passed. Everyone wants instant gratification. It won't happen here.
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