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Inflation Problems in the U.S.

 

No matter how we define the word, inflation is here. How is inflation impacting the U.S.? What does history tell us? Find out about it all right here.

Inflation versus Recession

 

What is the difference between inflation and a recession? Let’s get started on breaking it down. 

Inflation Definition

Merriam Webster: a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services

 

Google: a general increase in prices and fall in the purchasing value of money.

Recession Definition:

Merriam Webster: a period of reduced economic activity

Google: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Biden Administration: Both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data — including the labor market, consumer and business spending, industrial production, and incomes.

What Causes Inflation?

Economic recessions are caused by a loss of business and consumer confidence. As confidence recedes, so does demand. A recession is a tipping point in the business cycle when ongoing economic growth peaks, reverses, and becomes ongoing economic contraction. – thebalance.com

How is Inflation Calculated?

The government measures inflation by comparing the current prices of a set of goods and services to previous prices. – brookings.edu

Check out the Joint Economic Committee’s 2022 report on Goods and Services.

Inflation Goods and Services

You can see the Services are still trying to recover from the huge dip due to the shutdowns of 2020.

Inflation's Impact on the United States

Here are the inflation rates by state according to the Joint Economic Committee as of June 2022.

 

Alabama: 13.4%
Alaska: 12.4%
Arizona: 14.9%
Arkansas: 14.9%
California: 12.4%
Colorado: 14.9%
Connecticut: 11.1%
Delaware: 13.7%
Florida: 13.7%
Georgia: 13.7%
Hawaii: 12.4%
Idaho: 14.9%
Illinois: 14.5%
Indiana: 14.5%
Iowa: 13.8%
Kansas: 13.8%
Kentucky: 13.4%
Louisiana: 14.9%
Maine: 11.1%
Maryland: 13.7%
Massachusetts: 11.1%
Michigan: 14.5%
Minnesota: 13.8%
Mississippi: 13.4%
Missouri: 13.8%
Montana: 14.9%
Nebraska: 13.8%
Nevada: 14.9%
New Hampshire: 11.1%
New Jersey: 11.4%
New Mexico: 14.9%
New York: 11.4%
North Carolina: 13.7%
North Dakota: 13.8%
Ohio: 14.5%
Oklahoma: 14.9%
Oregon: 12.4%
Pennsylvania: 11.4%
Rhode Island: 11.1%
South Carolina: 13.7%
South Dakota: 13.8%
Tennessee: 13.4%
Texas: 14.9%
Utah: 14.9%
Vermont: 11.1%
Virginia: 13.7%
Washington: 12.4%
West Virginia: 11.4%
Wisconsin: 14.5%
Wyoming: 14.9%

The JEC also stated that when considering the inflation percentages for each state, inflation is costing American households $635 each month on average.

 
Inflation in the US
Source: JEC Calculations using: Bureau of Economic Analysis, Personal Consumption Expenditures; Bureau of Labor Statistics, Consumer Expenditure Survey; Census Bureau, American Community Survey.

How Inflation is Impacting the US Dollar

It’s no secret that the United States Dollar is not what it once was. How has it changed over time? This chart by officialdata.org provides a snapshot of the dollar being adjusted for inflation.

The dollar adjusted for inflation

At a glance, this chart might show that the dollar has become stronger over time. Hold that thought, and check out the buying power of the dollar since the same time period.

Buying Power of the US Dollar During Inflation

Inflation’s Impact on Wages

You’ve probably seen the wage increases at your local restaurants and fast food places. The minimum wage in Idaho for example is $7.25 an hour, and places used to pay that. Now, local fast food restaurants are paying upwards of $15.00 an hour. The below chart shows the net change in wages from 2020 to 2021 state by state. How does your state stack up?

State

Percent change

December 2020 average weekly wages

December 2021 average weekly wages

Net change

Alabama

4.9%

$1,099

$1,153

$54

Alaska

4.1%

$1,259

$1,311

$52

Arizona

5.5%

$1,214

$1,281

$67

Arkansas

6.4%

$1,000

$1,064

$64

California

4.8%

$1,722

$1,804

$82

Colorado

7.8%

$1,377

$1,484

$107

Connecticut

3.9%

$1,550

$1,611

$61

Delaware

5.9%

$1,262

$1,337

$75

Florida

9.7%

$1,182

$1,297

$115

Georgia

7.0%

$1,207

$1,292

$85

Hawaii

0.8%

$1,219

$1,229

$10

Idaho

7.4%

$1,034

$1,111

$77

Illinois

6.9%

$1,378

$1,473

$95

Indiana

7.0%

$1,078

$1,153

$75

Iowa

5.3%

$1,099

$1,157

$58

Kansas

5.8%

$1,070

$1,132

$62

Kentucky

5.0%

$1,057

$1,110

$53

Louisiana

6.0%

$1,077

$1,142

$65

Maine

6.4%

$1,093

$1,163

$70

Maryland

3.8%

$1,444

$1,499

$55

Massachusetts

3.7%

$1,767

$1,832

$65

Michigan

2.7%

$1,257

$1,291

$34

Minnesota

4.0%

$1,325

$1,378

$53

Mississippi

4.8%

$901

$944

$43

Missouri

4.5%

$1,128

$1,179

$51

Montana

7.1%

$1,035

$1,108

$73

Nebraska

6.1%

$1,078

$1,144

$66

Nevada

5.8%

$1,178

$1,246

$68

New Hampshire

12.3%

$1,407

$1,580

$173

New Jersey

3.0%

$1,518

$1,563

$45

New Mexico

4.4%

$1,051

$1,097

$46

New York

6.8%

$1,712

$1,829

$117

North Carolina

7.8%

$1,151

$1,241

$90

North Dakota

4.9%

$1,136

$1,192

$56

Ohio

5.2%

$1,161

$1,221

$60

Oklahoma

6.9%

$1,010

$1,080

$70

Oregon

6.1%

$1,256

$1,332

$76

Pennsylvania

5.1%

$1,287

$1,352

$65

Puerto Rico

3.9%

$621

$645

$24

Rhode Island

4.4%

$1,259

$1,315

$56

South Carolina

6.4%

$1,035

$1,101

$66

South Dakota

5.7%

$1,048

$1,108

$60

Tennessee

7.3%

$1,172

$1,258

$86

Texas

6.3%

$1,294

$1,376

$82

Utah

6.2%

$1,159

$1,231

$72

Vermont

4.9%

$1,133

$1,189

$56

Virgin Islands

3.0%

$1,058

$1,090

$32

Virginia

4.8%

$1,359

$1,424

$65

Washington

6.0%

$1,588

$1,683

$95

West Virginia

5.5%

$998

$1,053

$55

Wisconsin

5.4%

$1,140

$1,202

$62

Wyoming

7.7%

$1,061

$1,143

$82

Source: BLS.GOV

Inflation and the Housing Market

Nationally, home prices rose 20.2 percent year-over-year in May, CoreLogic reports. The increasing mortgage rates should have slowed down the price increases, however, tight housing inventory isn’t helping cool rising prices as rapidly as it could be.

This tension between home inventory and mortgage rates is creating buyer concern. he Fannie Mae index released this graph that measures home purchase sentiment. You’ll see it’s at one of the lowest points since April 2011.

Housing Sentiment Index

Inflation might have you wondering if now is a good time to buy, or if you should wait. Treasure Valley Dave gives his thoughts in this guide

Let us know what you think!

 

Is inflation impacting your family? Or maybe your spending? Do you feel optimistic about the direction of the economy? We’d love to hear your thoughts.

Give us a call or shoot us a text at (208) 860-2004 or send us an email at info@treasurevalleydave.com 

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