- by New Deal democrat
As almost universally anticpated, the April CPI continued to reflect the big increase in gas prices - although it didn’t pack quite the wallop that March did. Headline CPI increased 0.6%, following March’s +0.9%, causing the YoY% gain to increase to 3.8%. Meanwhile the core measure increased 0.4%, causing the YoY% gain to increase to 2.8%.
In addition to my usual practice of focusing on shelter and any other “problem children” with outsize numbers, this month even more than last month it is important to note the impact on real wages and incomes. Additionally, as I have done for the past few months, please note this IMPORTANT CAUTION: Because the October-November kludge in shelter prices of a mere 0.1% increase for two months is still present in the YoY calculations, and will be until this coming November, this is probably continuing to lower those comparisons by roughly -0.2%. In other words, take out that kludge and YoY headline CPI would probably be 4.0%, and core 3.0%.
First, let’s start with the YoY numbers for headline inflation (blue), core inflation (red), and inflation ex shelter (gold), which is up 4.1% YoY, the highest in three years:
Before I examine these components further, let me put front and center the impact on consumer incomes. As of April, nominally the average hourly earnings for nonsupervisory workers increased 0.3%, meaning that in real terms they declined -0.3%. Further, aggregate nonsupervisory payrolls increased 0.5%, meaning that in real terms they declined as well, by -0.1%. Here’s what real wages and payrolls look like in absolute terms normed to their recent peaks:
Real wages are down -0.9% from their peak and real aggregate payrolls are down -0.4%.
Neither of these mean that we are in a recession now. But the YoY comparisons are further cause for great concern. On that basis, real hourly wages are down -0.1%, and real aggregate payrolls only up 0.7%:
The former is frequently associated with a near in time recession, and the latter usually crosses the “0” line to the downside within a month or two before or after the onset of a recession. In fact, real aggregate nonsupervisory payrolls have only been higher YoY by 0.7% or less in four months over the last 60+ years without a recession ensuing shortly: once in 1968 and 1996, and two months in 2011. And note that if we add 0.2% to the YoY inflation measures to deal with last autumn’s shelter “kludge,” real aggregate nonsupervisory payrolls are only up 0.5% YoY, and only up 0.2% since last June, as suggested by the below graph, which increases real wages YoY by 0.1% and decreases YoY aggregate payrolls by -0.7%, so that the current YoY values show at the “0” line:
The bottom line is that, with this month’s further surge in inflation, both measures of real wages and payrolls are sending a “yellow flag” recession caution. This puts us back to just above where we were last September. Further, as I wrote recently, a -0.7% decline from peak in real aggregate payrolls is about the median decline at the onset of past recessions.
And the news was worse this month, because shelter costs unexpectedly increased 0.6% for the month, their biggest monthly increase since September 2023. This caused YoY shelter to increase to 3.3%, breaking down to 2.9% for rent, and 3.3% for Owner’s Equivalent Rent:
Finally, several other sectors showed inflationary problems.
Transportation services (mainly vehicle repairs and insurance) followed vehicle prices higher, but recently had calmed. Not in April. Prices increased 0.3%, meaning YoY prices were now higher by 4.3%:
Since vehicle prices themselves have been flat, this may reflect insurance premium increases.
Secondly, and more importantly, electricity prices continued to jump, increasing 2.1% in April alone, and rising 6.1% YoY:
This is almost certainly due to the impact of the building of AI data centers.
Put this all together, and you get a picture where gas prices have continued to surge, and several old problem children -shelter and transportation services - have acted up again. This has had a real, negative impact on ordinary consumer finances.
Needless to say, not a good report.
