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.
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.
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.
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.
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.
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
