Covering COVID-19 is a daily Poynter briefing of story ideas about the coronavirus and other timely topics for journalists, written by senior faculty Al Tompkins. Sign up here to have it delivered to your inbox every weekday morning.
It is probably not the best day for you to check your 401(k) account. Your accounts probably lost between 3%-5% in value yesterday, although as my mother used to say, “You didn’t lose anything if you didn’t sell.”
Wall Street is not just reacting to the naggingly high inflation figures contained in the Consumer Price Index, but investors are now anticipating that the Federal Reserve Bank will continue raising interest rates to combat inflation.
Energy prices are falling, but are still 25%% higher than a year ago. Gasoline prices are down 10% in the last month alone.
And food prices just keep going higher. Food that you prepare and eat at home is up 13% over last year. The one positive spin might be that the rate of increase is slower than it was all summer, but it is still rising. I am still surprised that the cost of food away from home — aka from restaurants — is up less, rising 8%. How are restaurants paying more for workers and food and still coming in at a lower rate of inflation than people who are eating at home? You have to imagine profitability is paying part of that tab.
Let me share two charts. One is the big picture trends chart and one looks at deeper details so you can see what is going up fastest.
Dive deeper into the data and you will find:
The index for other food at home rose 1.1 percent, while the index for cereals and bakery products rose 1.2 percent over the month. The meats, poultry, fish, and eggs index; the fruits and vegetables index; and the nonalcoholic beverages index all increased 0.5 percent in August. The index for dairy and related products increased 0.3 percent over the month, the smallest increase in that index since November 2021.
Your electric bills are 15% higher than a year ago. Part of that is rate hikes and part is an incredibly hot summer for some of you.
New car prices and transportation services such as airline tickets are running double-digits higher over a year ago so far in 2022.
Any hope that September’s inflation figures will improve will be shot if railroad workers strike Friday. Industry experts say there would be immediate shortages of everything from chemicals used by factories and wastewater treatment plants to grain deliveries that food factories use.
The Association of American Railroads says, “Historically, coal has generated more electricity than any other fuel, and railroads deliver around 70% of coal delivered to power plants. Railroads also carry enormous amounts of corn, wheat, soybeans, and other grains; fertilizers, plastic resins, and a vast array of other chemicals; cement, sand, and crushed stone to build our highways; lumber and drywall to build our homes; autos and auto parts; animal feed, canned goods, corn syrup, flour, frozen chickens, beer, and countless other food products; steel and other metal products; crude oil, liquefied gases, and other petroleum products; paper products; iron ore and scrap metal for steelmaking; and much more.”
Manufacturers are increasingly using rail. Just think of the ways that grain, moved by rail, is used in a range of products, from alcohol-based fuel to bread, dog food, cattle feed and beer.
The trains that cross America moved more than 2 million train cars full of chemicals last year.
Then Association of American Railroads said:
In 2021, freight railroads 2.2 million carloads of plastics, fertilizers and other chemicals. The highest-volume chemical carried by U.S. railroads is ethanol. More than half of all rail chemical carloads consist of various industrial chemicals, including soda ash, caustic soda, urea, sulfuric acid and anhydrous ammonia. Plastic materials and synthetic resins account for close to a quarter of rail chemical carloads. Most of the rest is agricultural chemicals.
If the trains stop running Friday, all of those shipments are in peril. Trucking companies are already running at full tilt and could not possibly pick up the slack. Supply and demand pressures would kick in and the cost of materials that factories, manufacturers and builders of all kinds would go up. As my mother would say, “This could be a big mess.”
How this week’s inflation figures spell a pay raise for people in 7 states
Washington, D.C., and 12 states adjust their minimum wages based on the inflation rate measured in August of each year. Five of those states limit how much the minimum wage can increase in a year, but seven states will raise minimum wages based on the just-released inflation rate.
The states that will raise minimum wages on Jan. 1, 2023, include Arizona, which has a current minimum wage of $12.80; Maine ($12.75); Montana ($9.20); Ohio ($9.30); and South Dakota ($9.95).
The federal minimum wage has remained at $7.25/hour for the past fifteen years. Since then, its purchasing power or real value has dropped by 27% because of increases in the cost of living. As a result, the value of the minimum wage is the lowest since 1956. In response, thirty states, Washington D.C., and dozens of local governments have introduced their own minimum wages that are higher than the federal minimum wage. Workers in many of those states still experience the same problem – if the state doesn’t raise its minimum wage on a regular basis, its value will decline.
- Minnesota and Vermont, for example, cap the annual increase at a maximum of 2.5% and 5%, respectively.
- Alaska’s increases are based off the preceding calendar year from when the determination of the next wage increase is made – that is, the 2022 increase was determined by the 2020 CPI. The 2023 increase will be based on the 2021 CPI, which Alaska is reporting to be 4.9%, though the state has not officially announced that the increase will be 4.9%.
- Oregon and Washington, D.C., whose minimum wages went up on July 1, both saw a 5.9% increase this year.
- Connecticut and Nevada are scheduled to introduce indexing to their minimum wages in 2024, though a ballot measure that Nevada voters will vote on this fall might remove that indexing.
Though the upcoming inflation-indexed adjustments to the minimum wage will likely be higher than in many previous years, they will not be out of line with past legislated increases in the minimum wage. When the federal minimum wage was raised from $5.15 to $7.25 in three steps in 2007, 2008, and 2009, the annual increases were 13.6%, 12.1%, and 10.7%, which are significantly larger than what is happening now because of indexing.
For example, Oregon and Washington, D.C. raised their minimum wage by 5.9% on July 1 because of inflation indexing and Connecticut and Nevada both raised their minimum wages by about 7.7% through legislation.
Bloomberg reports that cities and states that tied their minimum wage laws to inflation could not have anticipated what is happening and there could be a move to cap the inflation raises.
The amount of increases is likely to vary widely, said Sebastian Chilco, an employment lawyer with Littler Mendelson PC in California. That’s partly because some state and local wage laws call for using the consumer-focused CPI figures, instead of the urban workers figures, or CPI-W, that Denver used. Some look at a nationwide average of inflation for all major US cities, while others focus on a local or regional inflation rate.
In the District of Columbia, where annual increases arrive midyear, the minimum wage rose to $16.10 on July 1, up from $15.20, an inflation-based increase of 5.9%. Likewise on July 1, Los Angeles raised its minimum wage to $16.04, a 6.9% increase, and San Francisco’s wage floor rose to $16.99, a 4.1% increase.
Seattle; Flagstaff, Ariz.; and Mountain View, Calif., are a few of the cities set to announce inflation-based increases for Jan. 1.
A couple of notes from Canada
Canadian Prime Minister Justin Trudeau declared Sept. 19 a federal holiday to mark the funeral of Queen Elizabeth II. But businesses and even some provincial leaders are not impressed with the idea. Ontario, for one, will not go along with a special federal holiday honoring the queen.
Experts say one federal holiday costs the Canadian economy $2 billion to $4 billion if offices and businesses close and workers who remain on the job get holiday pay.
And at just the moment that Americans were reading the latest U.S. inflation figures, Trudeau announced new measures to help Canadians fight inflation, including doubling a quarterly tax credit sent to individuals and families with low and modest incomes to offset sales tax, and a C$500, one-time payment low earners to help pay rent. Trudeau also announced up to C$650 per year for dental care to children under 12 who do not have access to dental insurance.
It should not surprise you that opposition leaders warn that more government spending will increase inflation, not tame it.
As an aside, when I am working in Canada, I am always struck by how much Canadian media covers U.S. news compared to how seldom American journalists report about our biggest trading partner and next-door neighbor.
‘You might be right.’ When politicians actually listen to each other
I do not want to leave you with such concerning news. So, here’s some hope that thoughtful people can find a way to be more thoughtful.
I love the very premise of a new podcast just launched by two former Tennessee governors, one Democrat and one Republican. Govs. Phil Bredesen and Bill Haslam and some big names guests share stories about a time they had their own “you might be right” moment.
This could be a model for journalists to convene respected thought leaders from very different positions to find common ground. What a great idea to get people from different backgrounds together to listen and share, not just talk at each other.
We’ll be back tomorrow with a new edition of Covering COVID-19. Are you subscribed? Sign up here to get it delivered right to your inbox.