– by a New Deal Democrat
Let’s update some information related to inflation.
First, real hourly wages for non-executives rose by less than 0.1% in April. They are up about 3% from just before the pandemic, and also up just over 1% from their lows last June:
Note that the chart above is normalized to 100 from the previous long-term peak for wages in January 1973.
Next, real aggregate wages for non-supervisory workers tell us how much money the middle/working class earns in total, adjusted for inflation. This fell by -0.1% in April, but is 4.4% above its pre-pandemic level:
But the overall trend remains a very slow increase. Here’s what the year-over-year change looks like historically:
Note that when real aggregate wages go negative, this has *always* been a consistent indicator of a recession. At 1.7% higher year-on-year, this is on average for previous expansions and an important positive sign.
Digging a little deeper into the CPI report, aside from shelter, the big year-on-year increases were in food (13.5% weight of total value, unchanged over the past 2 months, but up 7.7% year-on-year base, down from a peak of 11.3% last August ); new cars (4.2% weight, down from -0.2% in April, but up 5.4% year-on-year from a peak of 13.2% in April last year); and something called “transportation services” (5.9% weight, down from -0.2% in April, but up 11.1% year-on-year, down from 15.3% last October).
So what exactly are “transportation services”? Here’s the detailed breakdown from the CPI report:
The two big items are motor insurance and repairs. This tells me that we still have a bottleneck in auto parts that affects both the production of new cars and the repair of older ones – especially since so many people are holding on to their older cars, given the prices of the new ones.
Finally, the producer price index for raw materials rose 0.1% in April after declines in February and March. Producer prices of goods for final demand rose by 0.2%. If that sounds good to you, it is. On an annual basis, raw material prices fell by -3.0% and finished goods prices rose by only 0.8%:
An important difference between the PPI and the CPI is that there is no “shelter” component in the former. Below are two long-term graphs of producer and consumer prices since the end of World War II:
