76% of California’s pandemic pay hikes lost to inflation – Press Enterprise

Inflation has gobbled up three-quarters of the buying power Californians’ got from pandemic-era pay hikes.

That’s what my trusty spreadsheet tells me when I compare stats from September’s Consumer Price Index report and recent earnings data for four metro areas – Los Angeles-Orange County, San Francisco, the Inland Empire and San Diego.

On average, weekly wages in these four markets rose 24% from the end of 2019 through 2023’s first quarter. Meanwhile, the local cost of living inflated by 19% through September.

That adds up to higher prices cutting the value of recent raises by 76%. It’s no wonder why so many folks in the Golden State are grumpy. It may help explain why we’ve seen a rash of labor unrest such as strikes in Hollywood and at Kaiser health care.

To be fair, inflation has improved modestly. Look at the most recent rate of California pay hikes of 5.7% pay jumps compared to a 4% bump in the cost of living. So that’s only 71% lost to inflation.

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Do not forget that such measurements don’t tell everyone’s story. And that’s why all the chatter about rising prices and what to do about the problem seems so misguided. It’s best to ignore much of the “is inflation cured?” debate – whether it’s expert babble, partisan thinking or some self-serving logic.

It’s important to know that inflation has no simple or pain-free cures. Too much medicine – namely, the Federal Reserve’s higher interest rates – could cost jobs or even cause a recession.

Still, an early exit from the inflation fight will leave many Californians struggling to meet their household budgets.

Look at a map

Ponder the inequalities of inflation’s bite by geography.

Inland Empire: There’s been a 92% loss in buying power to higher prices. That’s 25% raises during the pandemic era vs. 23% inflation. But it’s improved in the past year to just a 63% loss – 7.7% pay hikes vs. 4.9% cost of living.

San Diego: 81% pandemic loss – 26% raises vs. 21% inflation. In 12 months, 91% – 5.2% pay hike vs. 4.7% cost of living.

LA-OC: 77% pandemic loss – 22% raises vs. 17% inflation. In 12 months, 70% – 4.5% pay hike vs. 3.2% cost of living.

San Francisco: 55% pandemic loss – 25% raises vs. 13% inflation. In 12 months, 62% – 5.5% pay hike vs. 3.4% cost of living.

At the core

Next, consider what the CPI says about how inflation has hit different parts of a household budget. Keep in mind that spending habits vary broadly by family.

You don’t need the CPI to know that energy costs ballooned. Driving down the road or staring at a utility bill shows us this ugly trend.

California costs for gasoline, electricity and heating fuel were up 56% in the pandemic era after rising “only” 4.3% in the past year.

And if you eat, you know what’s up with food costs. Prices at the grocery store or dining out were up 23% in the pandemic era vs. 3.4% in a year.

Look, the absurdity within the inflation debate is highlighted by a statistic that economists and the price-watching Fed like to follow – the so-called core inflation rate.

That’s the cost of living minus food and energy. Yes, minus food and energy.

How we live without these purchases is inexplicable, but inflation gurus think they’re too volatile to be good price barometers.

  • MORTGAGE NEWS: What’s up with rates? Who’s lending? CLICK HERE!

Yet this odd benchmark – dismissive of everyday spending habits – may provide motivation for continued vigilance in the inflation battle.

California’s core inflation was up 15% in the pandemic era but rose a swift 4.3% in the past year. It’s one reason overall inflation increased slightly during the summer.

This recent surge signals lingering and problematic price pressures. The cost of labor-intensive services, for example, is being pushed up by significant pay hikes for workers.

Remember, Fed policymakers target 2% inflation as the norm – and that’s without life’s essentials. California isn’t anywhere near that yet.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

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