Inflation-adjusted wages slide
1/16/2010WASHINGTON - The notion that consumers will help lead the economic rebound received a stark rebuttal yesterday: American families are being squeezed.
Workers saw their inflation-adjusted weekly wages fall 1.6 percent last year - the sharpest drop since 1990 - even as consumer prices rose only modestly.
For some families, the overall inflation rate last year - 2.7 percent - understates their burden. Many are struggling with costs for health care and college tuition that have surged far above the overall inflation rate.
Economists expect core inflation to remain tame in 2010, giving the Federal Reserve leeway to keep interest rates atrecord lows. Even though the Consumer Price Index rose 2.7 percent from December to December, the core inflation rate rose 1.8 percent and energy prices shot up 18.2 percent. That was the biggest jump since 1979.
Food prices swung opposite. They fell 0.5 percent for the 12 months ending in December, the biggest drop since 1961.
Another factor that's limiting core inflation is housing costs. They dropped 0.3 percent for the 12 months ending in December. It was the biggest annual decline on record since 1968. Medical costs rose by 3.4 percent in 2009, the biggest advance since a 5.2 percent in 2007.