An unprecedented set of economic conditions have both battered and rewarded consumers over the past year-and-a-half or so with record high inflation wreaking havoc on household budgets at the same time a red-hot jobs market has provided a wealth of new employment opportunities and robust wage growth.
But even with average hourly earnings bumping up by 5% over the last year, the extra cash has fallen short of inflation-driven price increases and, according to a new Deseret News/Hinckley Institute of Politics poll, concern is outpacing optimism when it comes to the personal economic outlook of most Utahns.
When asked to rate their feelings about the economy in the coming year, 54% of respondents statewide registered some level of pessimism, while 45% said they were very or somewhat optimistic about future economic conditions.
Ongoing U.S. inflation continues to be a significant red flag for most poll participants, with an overwhelming majority, 93%, saying the broad-based price increases are very or somewhat concerning and only 8% said they were only somewhat or not at all concerned with inflation.
Everything costs more
Those price increases are hitting home for Spanish Fork resident Clayton Dangerfield, who said he’s not holding out hope for things getting better any time soon.
“Inflation is off the hook,” he said. “Everything I do costs more. Property taxes, groceries, what I’m paying at the gas pump. The only thing that hasn’t gone up are my wages. I’ve had some increases but it’s not keeping up with prices.”
Dangerfield, 65, said he’s making ends meet but only by looking for deals and cutting back on some purchases.
“I’m always looking for deals, trying to find better prices on the commodities I use,” he said. “Everything has gone up ... and you need to be a little more aware of what you’re paying out the door. I’m ok to give up a little on quality to get a better deal.”
Dangerfield’s perception of price issues is reflected in the latest Labor Department data that identified some declines in January, including prices on used cars and trucks, medical care and airline fares. But many basic necessities remain much more costly than a year ago, including grocery prices in January that were up 11.3% in the last 12 months, electricity costs that rose 11.9% and a 7.9% rise in the cost of shelter over the same time last year.
Inflation down, prices up
The latest data from the U.S. Labor Department marked seven straight months of declining inflation since hitting 9.1% last June, the highest rate in over 40 years. The report found the year-over-year inflation rate in January came in at 6.4%, down slightly from December’s 6.5% rate.
The eight-state Mountain West region, which includes Utah, continues to see inflation rates far outpacing the national average. In January, year-over-year inflation hit 7.2% for the area, the highest in the country but down from December’s 7.4%.
According to data from AAA, the average price for a gallon of regular gas in Utah was $3.78 on Wednesday, up from $3.70 a week ago and $3.32 this time last month.
But while overall inflation eased in January, Tuesday’s Consumer Price Index Summary from the Labor Department, found prices rose 0.5% from December to January after bumping up .1% from November to December. January’s price increases were driven primarily by rising costs for shelter — by far the largest — with the indexes for food, gasoline and natural gas also contributing, per the federal report.
Charlene Bennett, of Payson, said she and her family are fortunate to be keeping ducks and chickens, a practice which is helping offset some of the rising cost of groceries but are still having to make changes to keep the household budget balanced.
“The high prices are hitting our bottom line pretty hard,” she said. “It’s affecting the things we can do as a family and pretty much everything, really.”
Bennett said her family is working hard to find savings like consolidating errands that require driving and putting off trips to visit family members in Nevada and California — outings that have become too costly in the current economy.
Concern about inflation spanned all income categories, though Utahns making more than $150,000 a year were slightly less concerned than those earning under $25,000 annually, according to the Deseret News/Hinckley Institute poll.
But lower wage earners were more optimistic about the future of the economy than those with higher incomes, the survey shows.
Dan Jones & Associates conducted the poll of 802 registered Utah voters Jan. 23-30. The results have a margin of error of plus or minus 3.46 percentage points.
Jobs, jobs, jobs
Economists say ongoing inflation is being buoyed by a robust U.S. labor market that added a surprising 517,000 jobs in January as unemployment slipped to 3.4%, the lowest rate since 1969. There are now two unfilled jobs for every available unemployed worker in the country, an imbalance that’s helped push wages higher, now up about 5% over last year.
As employers are forced to spend more to compete for workers in an ultra-tight jobs market, those costs are typically passed on to consumers in the form of higher prices, and particularly so for service sector businesses.
Last month, Federal Reserve Chairman Jerome Powell noted the inflation/jobs market disparity but characterized it as a positive sign in the monetary body’s ongoing battle to quell U.S. inflation that ran at or near 40-year highs for much of the past year.
“It is a good thing that the disinflation that we’ve seen so far has not come with weakening in the labor market,” Powell said at a press conference following the Fed’s January board of governors meeting.
Powell’s comments followed the Fed’s announcement of a .25% increase to its inter-bank lending rate, the eighth consecutive rate hike going back to March of last year and a continuation of the Fed’s most aggressive strategy for decades. Its benchmark rate has moved from near zero early last year to its current level of 4.5% to 4.75%, the highest since 2007.
Further evidence of U.S. inflation’s ongoing persistence was reflected in a U.S. Department of Commerce report released Friday.
The Personal Consumption Expenditure price index, a metric closely watched by the Federal Reserve, rose .6% in January, a bigger than expected increase that’s moved up significantly from the .2% price jump from November to December last year.
The report, compiled by the Bureau of Economic Analysis, also found average earnings rose by .6% in January and consumer spending rose 1.8% over December.