The Riverside Press-Enterprise
Inflation forever scarring households
The cost of living in three years is up 15% in Los Angeles and Orange counties and 19% in the Inland Empire, leaving indelible marks on a family’s budget.
My trusty spreadsheet looked at January’s consumer price indexes for Southern California, released Tuesday. Boy, how the consumer costs have ballooned since January 2020, just before coronavirus upended the economy.
The short-term direction of inflation is mixed. January’s CPI shows L.A.-O.C. prices were up 5.8% in a year — a surprising bump from 4.9% in December. The Inland Empire’s 7.3% inflation rate was the lowest since September 2021.
However, put aside recent trends and the intense debate about the Federal Reserve’s efforts to chill an overheated economy. No amount of cooling will erase the pandemic era’s wallop to a household’s checkbook.
Details
First, ponder Southern California’s three-year inflation in prices of everyday things we buy:
• Food and beverages: Up 19% in L.A.-O.C. and 23% in the IE. Grocery bills soared as labor shortages hit farmers and shippers and drought shrank harvests. And dining out offers no savings.
• Housing: Up 15% in L.A.O.C. and 22% in the IE. Putting a roof over one’s head is far pricier due to a pandemic-era rush for larger living spaces and skyrocketing utility bills.
• Apparel: Up 5% in L.A.-O.C. and 22% in the IE. Consumers first bought comfortable clothes as work and learning went home and then had a second buying spree for new wardrobes as workers went back to the office and students returned to classrooms.
• Transportation: Up 19% in L.A.-O.C. and 22% in the IE. Soaring fuel prices made driving and flying far pricier. Parts shortages made new cars hard to find, ballooning used vehicle prices.
• Medical care: Up 12% in L.A.-O.C. and 14% in the IE. Worker shortages drove up wages. Prescriptions continued their long-running price hikes.
• Recreation: Up 12% in L.A.O.C. and 10% in the IE. A little good news: TVS have become cheaper. Everything else that’s fun — from pets to theater or museums — became more expensive.
• Other goods and services: Up 12% in L.A.-O.C. and 12% in the IE. Personal services — from haircuts to banking to funerals — were inflated due to a limited workforce. Health and beauty products, tobacco and paper goods are only modestly pricier.
• Education and communication: Perhaps the only good inflation news. Costs are up only 4% in L.A.-O.C. and 6% in the IE. People put off extra schooling, so tuition steadied. A cellphone glut led to a cut in prices.
Caveat
The IE is one of the nation’s hottest job markets in the pandemic era, and that’s why inflation in Riverside and San Bernardino counties runs hotter.
Also, Southern California wages are rising, too — up 17% in three years versus 11% in prepandemic 2017-2019, according to the federal employment cost index.
Yes, inflation’s gobbled up most, if not all, of those salary gains. On the flip side, plentiful jobs and boosted wages also are fueling inflation — both as a cost to sellers of goods and services as well as providing cash for shoppers to pay up.
Bottom line
Where will inflation relief come from? Look at three “big picture” slices of the CPI.
The best hope is for durables — the big-ticket goods such as furniture, appliances and vehicles. These costs are up 13% since 2020 in L.A.-O.C. and 16% in the IE.
But supply chain distribution challenges that inflamed these prices largely have been solved. Think about the recently falling prices of used cars as the supply of new cars improves.
The outlook is muddier for nondurable goods — the things you buy and consume frequently. These expenses — up 17% since 2020 in L.A.-O.C. and 21% in the IE — are largely life’s necessities.
Ups and downs will be seen in individual prices — think gasoline or eggs — but it will take a much slower economy to create significant bargains.
And then there are services, up 14% in L.A.-O.C. in three years versus 19% in the IE. Since they’re heavily peoplepowered and staffing remains problematic, rising wages will keep service inflation troublesome for the foreseeable future.