U.S. consumer prices surged at an annual pace of 7.5% in January, the fastest increase in four decades, the Labor Department reported Thursday.
Americans are facing higher costs for automobiles, household furniture and appliances, according to the government. While some of those purchases can be delayed, U.S. household budgets are being squeezed by something everyone needs — food — with consumers facing higher prices for meat, eggs, citrus fruit and now produce, as well. Gasoline prices for motorists also remain high.
The inflationary surge is being fueled by coronavirus-related supply and demand issues.
Consumers seem willing to buy goods after the coronavirus curbed personal spending, but now manufacturers have been unable in some cases to make enough of their products, and at the same time, face a shortage of shippers and truckers to get their goods into stores and showrooms.
U.S. President Joe Biden said in a statement that while the report “is a reminder that Americans’ budgets are being stretched in ways that create real stress at the kitchen table, there are also signs that we will make it through this challenge.”
“Forecasters continue to project inflation easing substantially by the end of 2022,” Biden said Thursday. “And fortunately, we saw positive real wage growth last month, and moderation in auto prices, which have made up about a quarter of headline inflation over the last year.”
But Greg McBride, chief financial analyst at Bankrate.com, cited the effect of higher housing costs, too.
“The price pressures on households just don’t end,” McBride said in a statement. “Not only have home prices jumped 20% in the past year, but now many rents are too, rising 0.5% in the past month alone. Nothing squeezes household budgets more than the outsized increases we’re currently seeing on costs for shelter and housing.”
The U.S. economy is sharply increasing, recovering from the pandemic at a faster pace than economists once projected, advancing by 5.7% in 2021, the fastest full-year gain since 1984.
The U.S., with the world’s biggest economy, added 467,000 more jobs in January, while its unemployment rate ticked up to 4%, as more unemployed people looked for work. Businesses added a record 6.4 million jobs last year.
The inflation reading for January included a once-a-year revision that affects seasonally adjusted data for the past five years, with the Labor Department also updating the list of goods included in the calculation, to reflect consumer buying habits in recent years.
Economists are predicting that over time, inflationary pressures will ease. But policymakers at the Federal Reserve, the country’s central bank, are signaling they will start increasing their benchmark interest next month to tamp down inflation and keep the U.S. economy from overheating. The Fed normally tries to set policies allowing for a 2% annual inflation rate, far less than the current jump in prices.
An increase in the Fed’s key interest rate will likely boost borrowing costs for consumers and businesses as well, helping to keep inflation in check.
New claims for jobless benefits fell in the United States last week, the Labor Department also reported Thursday, as many employers hung on to the workers they have and searched for more.
The agency said 223,000 unemployed workers filed for compensation, down 16,000 from the revised figure of the week before. The new total was in line with the claim figures from recent weeks as the U.S. economy continues to recover from the havoc inflicted on it by the advance of the coronavirus pandemic that swept into the country nearly two years ago.
Many employers are looking for more workers, despite about 6.5 million workers remaining unemployed in the U.S.
At the end of December, there were 10.9 million job openings in the U.S., but the skills of available workers often do not match what employers want, or the job openings are not where the unemployed live. In addition, many of the available jobs are low-wage service positions that the jobless shun.
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