Record-high U.S. inflation has been grabbing headlines for months, and higher prices across the board on goods and services are only escalating amid ongoing economic fallout from Russia’s invasion of Ukraine.
But according to a new Deseret News/Hinckley Institute of Politics survey, most Utahns are feeling it very particularly as the rate of those consumer price increases more than doubles how fast average wages are going up in the Beehive State.
Data collected before the economic fallout of Russia’s invasion of Ukraine began rippling across the globe finds U.S. inflation shot up to 7.9% in February, the highest in four decades and mostly driven by big cost increases for basic necessities.
February inflation was even higher for consumers in the Mountain West states, which include Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming, where the 12-month increase in prices hit a nation-leading 9.7%.
In a statewide poll conducted by Dan Jones & Associates from March 9-21 of 804 registered Utah voters, an overwhelming majority of respondents, 93%, said they were very or somewhat concerned about inflation, a number that matched what pollsters heard from Utahns in a survey conducted last month. The polling data has a margin of error of plus or minus 3.45%.
Poll participants also logged their worries about household earnings simply not keeping up with rising costs, and most said they haven’t seen any meaningful increases in their paychecks over the past year.
While 38% of respondents said they’d seen a raise in the past 12 months, 62% said their income has stayed the same. And 75% of those polled said their pay was simply not keeping up with inflation.
Ogden resident Marie Barnard said her two-income household, that also includes a toddler, has so far been able to absorb the rising costs of life necessities but noted inflation is bringing a new focus on economizing.
“For us, with a younger family, the higher prices for groceries, diapers, gas to get back and forth to work and from day care, we’re definitely feeling it,” Barnard said. “And we’re being more conscious of things like sales at the grocery store and working to be more aware of cutting down on driving and being efficient when we do.
“As of right now, we are doing OK, but if things keep trending up we may have to reevaluate.”
Barnard said her household has seen some nominal increases in earnings over the past year, but said she’s more concerned about family and friends who have bigger monthly costs and are being much more impacted by the disparity between wage growth and the record inflation rates.
“I think there’s a gap for many people,” Barnard said. “We have friends with bigger families, more children and they are definitely facing bigger challenges when it comes to basic things like feeding their families.
“And I feel like Utah’s lower wages are making that worse.”
February data gathered by the U.S. Labor Department found annual wage growth in Utah was at 4.2% for those working in nonfarm positions, lagging well behind February’s average U.S. inflation rate of 7.9% and made up less than half the ground on the 9.7% inflation that Utah and the other Mountain West states saw last month.
Utah Department of Workforce Services senior economist Michael Jeanfreau said Utah’s wage growth, outside of the context of current inflation rates, is a very solid metric.
“Market forces are working to drive up wages in Utah and we’ve been seeing it for a while,” Jeanfreau said. “Record low unemployment coupled with ongoing labor shortages are driving wages up in most sectors.”
Jeanfreau noted that while the state’s 4.2% wage growth is the mark of a well-functioning state economy, the inflation-propelled price increases, and Utah’s red-hot housing market, creates a tension alongside the rate of wage increases and job shortage issues. He also predicted the wage growth cycle will outlast inflationary pressures thanks to a Utah economy that recovered faster from COVID-19 economic impacts than almost any state in the nation and is now in a cycle of new growth.
February’s Consumer Price Index report from the U.S. Department of Labor found increased prices in nearly every category, and costs for gas, food and shelter were “the largest contributors to the seasonally adjusted all items increase.”
Over the past 12 months, grocery prices are up 8.6%, gas is up 38% and housing costs rose 4.7% according to the report.
All six major grocery store food group indexes increased in February. The index for fruits and vegetables had the largest increase, rising 2.3%, its largest monthly increase since March 2010. The index for fresh fruits increased 3.7% over the month, and the index for fresh vegetables rose 1.3 %. The index for dairy and related products rose 1.9%, its largest monthly increase since April 2011. And the index for nonalcoholic beverages increased 1.6% in February.
U.S. gasoline prices have been escalating since Russia launched its first military strikes on Ukraine on Feb. 24, and on Sunday AAA’s daily reportshowed Utah average gas prices at an all-time high of $4.34 per gallon, well ahead of the previous record of $4.22 set in 2008.
Earlier this month, the Federal Reserve raised its benchmark federal funds interest rate for the first time since 2018 and is the first of an expected series of interest rate hikes in the coming year that are aiming to put downward pressure on the inflation rate. Generally speaking, the strategy is intended to encourage savings by individuals and businesses through raising the cost of borrowing and debt-financing. Less money circulating in the economy leads to slower growth and less inflation.
While the first increase was a nominal 0.25%, Fed chairman Jerome Powell signaled last week that subsequent rate increases would likely be in 0.5% increments.
He added, too, that the policymakers could go so far as to send rates into “restrictive” territory that would slow economic growth and possibly raise the unemployment rate, if needed to tame high inflation.
“We will take the necessary steps to ensure a return to price stability,” the Fed chair said in his speech to the National Association for Business Economics’ annual economic policy conference earlier this month. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than (a quarter-point) at a meeting or meetings, we will do so.”
The Fed is under pressure from widespread criticism that it has reacted too slowly to a price spike that has catapulted inflation to four-decade highs. When they met last week, Fed officials forecast that they would raise rates six more times this year and four times in 2023. They also projected that inflation would slow to 2.7% by the end of next year.
Contributing: Associated Press