The cost of living presents Trump with the bill: prices up 30 per cent in six years
It’s not just petrol and diesel, but also food, schools and healthcare costs. In the US, job creation is slowing whilst wages are failing to keep pace with inflation
Too much inflation, too few jobs and inadequate wages. There are no warnings of a recession, but the economic picture in the United States is far less positive than individual statistics or the celebratory statements from the White House, particularly when it comes to the reality faced by American households and voters.
Inflation has indeed slowed to 3.4 per cent year-on-year, but what is of concern is the cumulative figure over the last six years: prices of everyday goods have risen by 30 per cent compared with 2020 and continue to rise. The cost to households of running a car, nursery fees, beef, paper towels or coffee has risen even more than the average. Not to mention dramatic costs, not even measured by the indices, such as expenditure on healthcare not covered by insurance, which has risen by 47% since 2020.
Consumers pay little heed to the monthly figures; they perceive the overall impact and need years to adjust to the new levels: hence their disappointment. This is exacerbated by the fact that average wages are not keeping pace at all with cost of living: for the past six months, the average growth in hourly wages has been lower than that of prices, leading to a steady erosion of Americans’ purchasing power. In September – the latest figure before the election – wages rose by 3 per cent year-on-year, heightening fears of a sluggish economic expansion incapable of alleviating the malaise of the ‘K-economy’ and growing inequality.
Meanwhile, job creation slowed to 29,000 new jobs in September, with downward revisions of 60,000 jobs in the previous two months, showing that opportunities are scarce for both young and older people. Net recruitment was limited to the healthcare sector, construction (typically temporary roles) and manufacturing. The unemployment rate remains low, at 4.2 per cent, although this figure is skewed by the departure of immigrants and baby boomers entering retirement.
And whilst rising Treasury yields may seem a distant prospect, the average voter is well aware of how much they are paying for their mortgage, with interest rates now exceeding 7 per cent. Affordability is becoming almost frustrating in the face of record-high house prices. “Voters have become incredibly impatient and disconcerted by inflation,” Stephen Weymouth, an economist at Georgetown University in Washington, explains to the Wall Street Journal.
