Inflation is slowing, but prices are still high — what gives? News4’s Maggie More explains the difference between inflation, disinflation and deflation, and the role each one plays in those sky-high grocery bills.
If you found yourself wishing you could nudge prices down a dollar or two (or ten) after your last trip to the grocery store, you're in the same boat as a majority of Americans right now. Stuff is expensive, and has been since around the time the COVID-19 pandemic started.
Unfortunately (and you can learn why here), most of those prices are probably staying where they are. And if prices can't go down, there's one other option to get us out of the woods: wage increases for workers struggling to afford basic necessities.
A majority of Americans, around 64%, did actually see an increase in wages at some point between October 2022 and the end of October 2023, according to a survey from Bankrate. Of those surveyed, 38% said they got a pay raise, 16% got a better-paying job, and 10% said they got both.
But if a majority of workers saw bigger paychecks in the past year or so, why do so many people still feel as though everything is too expensive?
Inflation is still outpacing wage growth for many groups
The answer, once again, comes down to the inflation rate. Of the workers surveyed who did get a raise, only 33% said their income kept up with, or exceeded, increases in their household expenses due to inflation, according to that survey.
"[P]retty close to six in 10 Americans say that they feel like the economy is in a recession," according to another poll by Bankrate, said Sarah Foster, a researcher covering the U.S. economy and the Federal Reserve for that company.
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As the New York Times reported in November, we're in something of a "vibecession," where economic data showing a strong economy has made little impact on public opinion, especially among young people.
"Social media reflects — and is potentially fueling — a deep-seated angst about the economy that is showing up in surveys of younger consumers and political polls alike,' the Times said. "Young people are especially glum: A recent poll by The New York Times and Siena College found that 59 percent of voters under 30 rated the economy as 'poor.'"
The Associated Press, in a poll conducted in October with the NORC Center for Public Affairs Research, found that "about three-quarters of respondents described the economy as poor."
[W]orkers are seeing this remarkably strong job market, [but] they're not necessarily feeling like they're reaping the benefits of it, because inflation at the same time took off. And it took off at a much faster pace than their wage growth.
Sarah Foster, researcher covering the U.S. economy and the Federal Reserve for Bankrate
It's what Foster referred to as a "tale of two economies."
"This is a remarkably strong job market. We thought before the pandemic, we were living in the strongest job market in half a century," she said. "But now the job market has fully eclipsed that," with unemployment lower than 4% for "the longest stretch of time since the 1960s."
That's part of the reason why, in recent years, so many Americans could negotiate for raises or find better-paying jobs. If there are fewer people unemployed, employers can't replace workers as easily, making it more likely they'll negotiate with their current workers. Men and millennials were among the most likely groups to see raises of 5% or more between 2022 and 2023, Bankrate found, as were workers who left old jobs and found new positions.
But, Foster said, at the same time that "workers are seeing this remarkably strong job market, they're not necessarily feeling like they're reaping the benefits of it, because inflation at the same time took off. And it took off at a much faster pace than their wage growth."
Bankrate's quarterly analysis of inflation and wage growth showed that wage growth was three percentage points lower than overall inflation.
The economic bad vibes affect different groups in different ways
That inflation-versus-pay gap hurts more for some groups, such as people working in "retail and food services and accommodation," Foster said. "...Those are those lower-wage industries where, you know, maybe you are, on a technical standpoint, beating inflation, but you're also in this lower wage sector that likely had you living paycheck to paycheck even before inflation surged,” she said.
And, while the economy is doing well by many broad metrics that the government and economists use to determine things like whether we're entering a recession, the inflation that exists is noticeable, to say the least.
"There is the belief in -- and it's driven by political forces -- that our economy is not doing well," said Ron Hill, a marketing professor at American University. "But unemployment is at a low level, and inflation is beginning to come down. The problem is where inflation does exist, it exists in places where people see it."
It's visible at gas stations, and at the grocery store, Hill said -- and it's felt most by people who have the least wiggle room to deal with it.
Economic research from the Bureau of Labor Statistics, highlighted by the AP, points out that people with lower incomes essentially face a higher inflation rate, "because they spend a greater proportion of their income on such volatile expenses as food, gas and rent — items that have absorbed some of the biggest price spikes" from inflation.
Other groups feeling the squeeze more include seniors on fixed incomes, Hill said, and "people just entering the market, just coming of age, just starting their careers after high school or after college, that are trying to get into the material game and finding it very difficult to do."
Karen Ergenbright, the executive director of Dulles South Food Pantry in Loudoun County, Virginia, is seeing these effects at work.
"We have seen a 26% increase in individuals coming to the pantry between 2022 and 2023," Ergenbright said.
The number of visitors to the food pantry over age 60, Ergenbright said, has increased by 33% over the same time period.
That has been the group responsible for most of the increase, she added, but she's also seen a few more college-aged people when she's worked on the ground helping with distribution. The pantry is also feeding roughly 250 families per week, or around 1,000 families a month -- up from the year before.
The number of visitors has increased steadily alongside rising inflation rates, and it's gone up more from 2022 to 2023 than it did during the period Ergenbright associates more closely with pandemic hardships, between 2020 and 2022.
And those changes are taking place in a county that has been counted as the richest county in the U.S. for the past 12 years.
"But even though they say that -- 3.32% of the Loudoun County population is in a state of poverty," Ergenbright said. "That's about 13,700 people out of 411,000 people .... It's kind of staggering to think that the one of the richest counties in the nation -- in the nation! -- still has issues with food insecurity."
In such cases, even if wages do go up, workers don't feel like they've won, so much as they feel like they're drowning more slowly.
"Especially since the pandemic, we've been accustomed to horrible economic news," Foster said. So even though "there is a lot to celebrate about the economy" in a broad sense, the way most Americans look at the economy is different than the way economists do.
"If Americans were to really define a recession," Foster said, they might say it's "the inability to afford their basic necessities, to afford the occasional wants, and maybe the feeling of struggling to pursue your financial goals."
Inflation on its own puts the feeling of economic security in jeopardy, "whereas economists are actually looking for broad-based declines in multiple measures of economic growth," Foster said.
Add the loss of pandemic-era assistance for child care and the return of student loan payments to all that inflation, and it's no wonder so many Americans feel like the economic vibes are atrocious, even as wages creep up over time.
Still, questions remain about whether the slow movement in wage hikes is actually a more sinister desire to pad corporate profits. Read about whether corporate "greedflation" is actually responsible for some of the inflationary pressure here.
News4's Consumer Reporter Susan Hogan, Digital Managing Editor Carissa DiMargo and Digital Content Producer Sophia Barnes contributed to this report.
