The economy is trying to recover from the COVID-19 pandemic along with the recession caused by the lockdown. So most Americans are bringing home wages that are slightly higher than they have been. The problem is that rising inflation is now outpacing wage growth, therefore America’s purchasing power is lower in most U.S. households.
The Bureau of Labor Statistics recently released data that reveals what the real average hourly earnings are. Because of the effects of inflation, they are 2.4% lower than they were from December 2020 to December 2021.
Greg McBride, a Bankrate chief financial analyst, told CNBC that we had the best year of wage growth that we have seen in many years, but it still will mean a loss for most households. People’s expenses increased faster and did away with any benefit a pay raise might have given families.
It was also reported that consumer prices are rising at a 7% rate since December of 2021. This is the highest rate in about 40 years. But President Joe Biden is attempting to minimize the hike. He wrote on Twitter, “Today’s inflation numbers show a meaningful reduction in headline inflation over last month. We are making progress in slowing the rate of price increases. But there is still more work to do — I remain focused on lowering costs for families and maintaining strong economic growth.”
Most people are not accepting the Biden brush-off. According to a Fox Business survey done in December, 47% of Americans believe that President Joe Biden’s policies are “hurting” the economy. Only 22% believe that the president’s policies are “helping.”
To make matters worse for the White House, 46% believe Biden’s social spending agenda would cause inflation to go even higher. Only 21% believe it would help lower inflation.
There are a number of other insights gained from the report from the Bureau of Labor Statistics, including the fact that rising prices over the previous six months have caused financial hardship for two-thirds of American voters. That stat rises to three-quarters of people who live in lower-income households.
People two to one indicate that the president’s economic policies have hurt them instead of helping them personally. This is mostly driven by almost two-thirds of Republicans saying that they have personally been hurt, which is almost five times the number of Democrats who say the same. In December of 2018, one-third of Democrats said they had been hurt by former President Donald Trump’s economic policies in a Fox News survey.
And only 1 in 6 voters believe that they are better off financially than they were just a year ago. A majority of people indicate that their financial situation is negative. That is a complete reversal since August when over half of the people said their finances were positive.
Lawrence Summers, a Harvard University economist, denounced the Biden administration’s effort to minimize and deflect the truth about our country’s inflation. This former advisor to President Barack Obama said, “We have a serious inflation problem whatever the precise CPI reading. Inflation is running well ahead of anything seen during the guns and butter Vietnam episode and 50 percent above where it was when Pres Nixon imposed wage-price controls.”
Summers went further, saying that the White House is citing leading economists that see a drastic decline in inflation over the next two years. He said that certainly could happen, but on the other hand, those same experts were looking for inflation to come in below 3% this year and it turned out to be 7%.
I wonder what all this means for this year’s midterm elections?