U.S. Bureau of Labor Statistics Reports Inflation at a 40 Year High


The U.S. Bureau of Labor Statistics (BLS) recently released data that reveals inflation is increasing at an even faster rate than was predicted. The inflation rate has climbed to an almost 40-year high. 

According to the Bureaus statement, the all items index rose 6.8 percent for the last twelve months ending in October. This is the largest increase over twelve months since the period that ended in June of 1982.

The Wall Street Journal reported on the fact that the so-called core price index climbed 4.9% in November from twelve months earlier. This index does not include the more volatile categories of food and energy. This increase was the highest rate since 1991. 

The Journal also noted that this increase came before the Omicron variant of COVID-19 emerged. So there is now a greater threat facing the nation regarding inflation as we deal with the pandemic entering its 2nd year. 

These threatening economic numbers represent the 6th month in a row where inflation rose over 5%. Skyrocketing inflation is a problem for President Biden who still is working on getting his multi-trillion social spending agenda passed. And it certainly wont help his approval rating that continues to decline.

All this led to The New York Times writing, The question is what happens next. Fed officials have become increasingly concerned about price increases — both because the uptick has lasted longer than expected and because it shows signs of broadening to areas less affected by the pandemic.

At the beginning of this year, price increases were only affecting consumer goods. The pandemic changed the way people were living and there was a high demand for used cars and couches. Factories across the globe were backlogged as shutdowns caused by the pandemic paused production. 

Most of us are aware of the chaos and crisis at our shipping ports because there were too many U.S.-bound goods trying to get out of Asia. Although the jam was projected to be only temporary, it lasted for months as demand for goods remained strong and the virus continued to slow down production.

All this pressure led to inflation broadening, and the federal government has been left with a plan for their next policy steps. 

Jerome H. Powell, the Fed chair, said in congressional testimony, Generally, the higher prices were seeing are related to the supply-and-demand imbalances that can be traced directly back to the pandemic and the reopening of the economy, but its also the case that price increases have spread much more broadly in the recent few months.

He also said that he believes the risk of higher inflation has increased. 

This sentiment was also shared by Larry Summers. He was Bill Clintons Treasury Secretary and director of the National Economic Council under former President Barack Obama. Summers warned while doing a CNN interview that it was unlikely that inflation rates would return to normal any time in the near future. He believes that we are going to have inflation like we have not seen in 30 years. This will remain true unless the Fed makes some significant moves regarding their monetary policy, or theres some kind of calamity that disrupts the economic growth that America is enjoying. He just doesnt see inflation going back to the normal 2 percent level without something on the horizon that changes the path we are now on. 

Summers believes that the Fed has made a significant mistake in their approach by doubly down on the fiscal stimulus we had at the beginning of the year.

Don’t look now, but I think Bidens approval dropped another point.