Category: Inflation

Today we had a CPI update from the Bureau of Labor Statistics. Back in November 2024, I predicted that the official number would be 3 percent. (Keep in mind that official CPI does not include the cost of buying and paying ongoing costs for a house, the largest expense for the typical American family.) My reasoning for a persistently high number is that we have “leftover inflation” from union deals struck during raging Bidenflation, from businesses finally adjusting their prices to reflect the new reality, etc. Essentially the wage-price spiral.

Let’s see how I did!

The NYT today says official CPI is at 2.7 percent and 2.9 “core”.

Democrat-sponsored NPR says that my theory is garbage and all of the inflation was created by a single Republican:

Related:

• Can our government generate its own inflation spiral? (2022): Government is nearly half the economy and everything the government pays money for is indexed to inflation. Medicare, military and similar contracts, Social Security, pensions, employee salaries, etc.

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I spent a few days in Sun Valley, Idaho (for work, believe it or not!) last month and asked the valets working a National Ballet of Canada event what was the conventional/expected tip. “Ten or twenty,” was the response.

(I expected to see Justin Trudeau in blackface among the corps de ballet, but was disappointed.)

Readers: How much are you giving to valets? ChatGPT: “$2 to $5 when your car is returned; $2–$3 is common for average service; $4–$5 is appropriate for prompt, courteous, or extra-helpful service.”

Note the 1948 Buick Roadmaster in the photo below.

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I’m not sure if it’s our inflation-free (TM) economy or that self-storage places underprice at move-in time and then raise the rent according to how difficult they think it will be for you to move your stuff, but the local self-storage place (Compass) just bumped our rent by 24 percent after six months (54 percent annual inflation rate), effective today.

Is this

• a sign that inflation is alive and well?
• an indication that South Florida continues to prosper?
• a standard bait-and-switch tactic by self-storage places?

Rents for apartments and prices of houses are rising only gradually here right now, as far as I know, so I don’t think the “South Florida is booming” explanation is correct.

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Leftover Inflation? (November 2024):

I wonder if there is a significant “leftover inflation” yet to come, though, from companies and people who neglected to raise prices or who were locked into long-term agreements during the core years of Bidenflation.

Our electrician, a solo practitioner in mid career (i.e., he already has all of the skills that he is going to have), is coming over tomorrow. His rate in December was $100 per hour. His rate for 2025: $125/hour. I think that he was at $90/hour in 2022, when we first hired him, but he apparently hadn’t kept up with inflation, which means he is now charging 40 percent more than he was in 2022.

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“Inflation Heated Up in January, Freezing the Fed” (Wall Street Journal, today):

Consumer prices rose 3%, as fight against inflation continues to face headwinds

So prices are going up 0.247 percent per month, the rate that compounds to 3 percent after 12 cycles?

Consumer prices rose briskly in January, extending a recent pattern of price increases at the start of the year that likely derails the prospect for Federal Reserve rate cuts anytime soon.

The Labor Department said Wednesday that prices rose last month 0.5% from December on a seasonally adjusted basis.

0.5 percent per month works out to 6.17 percent annually.

So… the current inflation rate is 6 percent and we are told that it is 3 percent.

Related:

• Leftover Inflation? (November 2024, on the spiral)
• Can our government generate its own inflation spiral?
• Economist answers my question about high interest rates and high deficits

If you’re looking for a Valentine’s Day present that won’t break the bank, a piston-powered Cirrus SR22 for $1.2 million:

(Don’t forget state income tax on top of this unless you live in one of the states that sensibly doesn’t tax aircraft purchases (Maskachusetts being a surprising example!).)

If we specified pre-Biden delivery terms of 4 months, the price would be higher. Cirrus currently has 1.5-2-year waiting list.

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As part of my mother’s moving from independent living to assisted living (February 2024) and then onward from assisted living into the next realm (January 2025) we have needed some assistance from a local moving company.

The February 2024 quote: “Charge is 2men $150 per hour 3h minimum, 1h travel time, $50 fuel plus materials (if we use any), $500 minimum.”

The January 2025 quote: “Hourly rate $185 2men 3h minimum 1h travel plus materials and fuel – starting $655 minimum.”

That’s a real-world annual inflation rate of 23 percent ($185/$150).

The latest official government inflation number from the Bureau of Labor Statistics was supposed to come out today. How does the BLS fantasy compare to our lived experience?

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Inflation is whipped, except that the most significant cost for a typical person remains unaffordable (the “housing affordability crisis”), with government intervention required. The latest affordability crisis (i.e., Americans not being rich enough to afford what used to be considered American life) is for cars (San Jose Mercury News):

The good news is that expert assistance has arrived:

Bay Area residents wanting — or needing — to buy a car are steering this winter into what experts call an affordability crisis.

“The price of new cars, in general, has become alarming for a lot of people,” said Brian Moody, executive editor of Autotrader.com.

Nationwide, the average monthly payment for a new vehicle in November was $753, up more than 30% from just five years ago, said Jessica Caldwell, a head analyst at Edmunds, which tracks the auto industry.

Adding to buyers’ woes is the high price of most everything else. A recent Edmunds study found 54% of people surveyed who were planning to buy a new or used car in the next year said they would have to work extra hours or take a side job to afford it. “This wasn’t an issue 10 years ago,” Caldwell said.

Prior to the November 5, 2024 election, the same newspaper said that inflation was finished. October 31, 2024:

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The Netgear switch that I purchased in May 2022 (to run TP-Link Omada: like a mesh network, except that it works (alternative to UniFi), which is still working great) for $180:

I was in a conversation with some friends, one of whom is a UniFi zealot, and wanted to check the power output compared to a feeble UniFi switch. I learned that the exact same Netgear switch was still available from the same retailer in December 2024… for $250:

That’s 39 percent inflation over 2.5 years in our otherwise inflation-free economy.

How’s our four-year-old minivan doing as a collector’s item? KBB emailed a week ago to say that it was still going up in value.

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Email received earlier this month about a price increase that begins today:

We are informed that we live in an era of “disinflation” (see for example, Nobel Prize winner Paul Krugman in the NYT, 2023: “How (Many) Economists Missed the Big Disinflation”). I guess disinflation doesn’t preclude disflation (inflation in the cost of whatever Disney is selling).

Now that the election is behind us, the New York Times is writing that inflation and crime are both raging in New York City. “My Restaurant Was Named One of New York City’s Best. Here’s Why It Closed.” (NYT, Dec 28, 2024): “The combination of inflation, rising crime that required us to pay for security guards and declining profits simply proved insurmountable.”

Related:

• “Inflation Is Down, Disinflation Denial Is Soaring” (New York Times, September 2023)
• “All the Good Economic News Vindicates Bidenomics” (New York Times, a month before the recent Election Nakba): A week earlier we learned that inflation has continued to decline and is now more or less at the Federal Reserve’s target of 2 percent. This success has defied the view, held by many economists just a couple of years ago, that disinflation would require years of high unemployment.
• “Biden’s Chief Economist Processes the Election With ‘Confusion, Guilt’” (New York Times, November 2024): I understand that disinflation is less satisfying to people when they want their old prices back. I get that, and I’m going to have to deal with that, but at the same time, I do not regret talking about the sharp disinflation, or the strong G.D.P. growth or the historically low unemployment rate.

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