It's hard not to notice that your grocery bill is higher month in and month out, and your utilities keep inching up, or you're paying more interest on credit card debt, You're in good company. The cost of living in the United States has increased significantly since twenty twenty, and while inflation is said to be easing, it doesn't mean the cost of goods are going back down. It just means
they're increasing at a slower rate. Bloomberg's Read Picker and Jenna Hawk crunch the numbers to see just how much more Americans are shouldering in their everyday life expenses than they were before the pandemic.
Compared to January twenty twenty, wages are up about twenty percent. But I think what makes people quite upset is when you adjust for inflation, that same measure shows that wages over that same period of time, instead of being up twenty percent, are up less than one percent. And so you look around and yes, your wages may have kept up in the aggregate, but some of these things that you're paying more four have risen much faster than your wages.
So, say you spent one hundred dollars on goods and services in around January of twenty twenty. Now, to get all of those same goods and services, it would cost around between one hundred and nineteen to one hundred and twenty dollars, So we're talking about roughly a twenty percent increase. And I think the really tricky thing here is that it's not just small luxuries that we're talking about, Like truly, no area of a household budget has been spared.
When it comes to this rise in the cost of living.
Read and Jenna join me to walk through every corner of the household budget that have been affected and how it shapes consumer feelings about their own economic futures. I'm Scarlet Foo today on the big take, the cost of living is more costly than ever. So you write that after years of inflation, US consumers are now, using your words,
shouldering a burden unlike anything seen in decades. So I'd like to start by you're giving us an overview of what's happening, because consumers are definitely feeling stressed, even as the official numbers show inflation is slowing down absolutely.
So typically when we write or talk about inflation, we're talking about the annual rate or how much prices have risen from a year ago, and while that rate has fallen a lot since last year. When you talk to actual people, not economists or policymakers, they tend to focus on the price level, and the fact is that prices are much higher now than they were before the pandemic.
So this story by Jenna and I, the purpose of it was to really put numbers to show how much those prices have increased over the last few years and really get at this idea of the cumulative burden of inflation. And in fact, prices have risen about as much in the last few years as they had it in the full decade preceding the pandemic.
You know, one thing I think about is before the pandemic, there was this conventional wisdom that inflation was super low and it wasn't going to spike again. We had fixed it. It was vanquished. No one's saying that anymore, are they read.
Not that I know of. I think the team transitory discussion that we saw arise at the start of this has certainly had a moment where we now realize that inflation is something that can always come back. It just depends on the moment in time.
My question now is how much is COVID at fault for these increased costs or were there already some shifts, big shifts taking place across the economy that was pushing up costs. In other words, inflation was inevitable after a period of super low price increases, and this is just what we're going to see as the cycle turns.
I'm not sure anything in the economy is inevitable, and I think one key example of that is the recession that's been telegraphed and talked about for over a year and a half now that has yet to materialize. Doesn't mean it won't, just hasn't shown up yet. But I think the reasons for inflation, there's quite a few, but
to focus on some of the major ones. So the pandemic itself wreaked havoc on supply chains globally, making it more difficult and more expensive to not only build but also transport merchandise across the world and within the US. Two At the same time, you had this shift from spending on services, which is what the majority of Americans spend their money on, to goods, in part because people couldn't go out and spend on travel or dining out
in the same way. And so at the same time that you saw this crunch on supply chains, you also saw more demand. You also saw this unprecedented government support. So when we think about out the way that the US government responded to the economic disaster that was unfolding from the pandemic, the government really stepped in both with expanded unemployment benefits as well as direct checks to households.
In these stimulus checks that ended up leaving many families with thousands of more dollars in their bank accounts to help offset some of the extra burden that they were facing in the depths of the pandemic and in the
early part of the recovery. But what that ended up creating was this mixture of both this rebound in the labor market that helped a lot of people go back into employment quickly, but also this rebound that forced employers to really offer big bumps in wages in order to try to fill these positions quickly, and we hurt a lot, especially at the beginning of this rebound, of employers struggling to fill these positions and ways in which they were
trying to make their offers more competitive. Nation of all of this left folks with a lot of excess money, which we often talk about as excess savings, which is essentially just how much Americans have saved compared to the pre pandemic trend, and that really added to this consumption trend as well.
So you bring up a good point, which is wages have increased, and they've actually increased quite a bit since twenty twenty. That should blunt the impact of inflation. Nevertheless, and I know you've written about this extensively, why do people still feel worse off than they did before the pandemic in terms of wages.
We have seen historic wage gains. It's truly been amazing what we've seen, and you've seen some of the biggest of these wage gains happening at the lower end of the income scale. Compared to January twenty twenty, wages are up about twenty percent. But I think what makes people quite upset is when you adjust for inflation, that same measure shows that wages over that same period of time, instead of being up twenty percent, are up less than
one percent. And so you look around and yes, your wages may have kept up in the aggregate, but some of these things that you're paying more for have risen much faster than your wages. So on a nominal basis, wages are up twenty percent, But what happens when your grocery prices are up twenty five percent? You know you feel that differently in your budget. And so it's this idea that this inflation is really eroding a lot of these historic gains that we've seen in recent years.
One thing that's clear is I think you really hit it on the head when you said it's how people feel and what we experience in our day to day life. Our routines changed during the pandemic, that's clear. But for most of us things have largely returned to the pre pandemic normal as well, the cost of living has not. And Jenna, you guys crunch some numbers. Just give me
some context here. Say you spent one hundred dollars on goods or services before the pandemic, how much would those same goods or services cost today?
So, say you spent one hundred dollars on goods and services in around January of twenty twenty. Now to get all of those same goods and services, it would cost between one hundred and nineteen to one hundred twenty dollars, so we're talking about roughly a twenty percent increase. And I think the really tricky thing here is that it's not just small luxuries that we're talking about, Like truly, no area of a household budget has been spared when it comes to this rise in the cost of living.
We're talking about basic necessities like rent, gas, electricity. It's not just those extra amenities that people think about, right, and.
Food as well.
The most direct way people feel inflation is through their grocery bills. What are the numbers when you look at the grocery bills that surprised you the most.
So we're seeing that groceries are up around twenty five percent, and that you can sort of break that down into various items. Coffees up about two dollars a pound. We saw the egg crisis earlier in the pandemic, where eggs were almost like triple the price of their normal amount. Ground beef used to cost like three dollars in eighty nine cents in January of twenty twenty.
Now it's more than five dollars.
So we're talking again about these basic necessities, these basic household items that you need to feed a family, and they're up significantly higher, and just.
To jump in there. I think groceries in particular is one that's interesting because while Americans have long been used to mini prices going up a little bit each year, say your rent bell, for instance, groceries are something that
we're historically quite stable before the pandemic. So yeah, there might be some price spikes for specific items due to drought, disease, or natural disaster, but in aggregate, in the four years leading up to the pandemic, grocery prices rose less than one percent, So that really provided this sense of predictability that many households came to rely on that really has been erased these last couple of years.
What's the forecast for next year in terms of grocery prices? Are we going to continue to see this rate of change?
So the forecast that we're seeing for next year is that grocery prices are going to be cut to less than two percent growth. But again, I think it's this issue that we're seeing that it's not always about year over year change. People are still thinking about how much growth in prices and levels of prices that they've seen since the start of twenty twenty, and that's not really
going away anytime soon. When people talk about inflation slowing down or cooling, it maybe gives the impression that, oh, maybe things are going to return to normal. But your January twenty twenty grocery bill is not coming back. And that's something that Americans are really grappling with right.
Now after the break. How is inflation affecting people's chances of owning a home? Let's talk about housing, because that, by far is the largest expense for Americans in any given month, whether you rent or whether you own. How is inflation affecting renters versus homeowners.
We're seeing that rent is up about twenty to thirty percent, depending on the source of data that you go with, but rent is extremely high right now compared to pre pandemic levels. And on the one hand, when it comes to home ownership, home values have actually skyrocketed over that same time period. We're seeing home values up around forty two percent from the start of the pandemic.
Which is kind of crazy.
If you were lucky and you were part of that group that was able to buy a house before the pandemic, you saw this massive gain and wealth. But if you weren't able to make that jump from renting to owning a home. You sort of lost out without really knowing that you were supposed to do this back in twenty twenty.
And these are paper gains for homeowners as well, because there aren't that many transactions taking place in the housing market right now, because no one wants to give up their sub three percent mortgage at a time when mortgages cost at least seven percent.
Yeah, mortgages at the end of November are up around to seven point five percent now, so it's sort of never been more expensive than it is right now to make plunged try to buy a home. So if again, if you were one of those people that got lucky and decided to buy a home before before you saw all these interest rates hikes, you saw this massive.
Gain and wealth.
But if you didn't, it also sort of makes it harder again for renters because the people that were going to buy a house ended up staying renting, and that just makes the rent landscape even more competitive.
Buying a house is one thing, or renting a house, but then you've got the routine costs like utilities, specifically electricity. Talk about what that increase looks.
Like so every part of home ownership and dealing with a home right now has gotten more expensive. Your rent is more expensive, mortgage rates are higher, and even utility bills like electricity and natural gas are up. We see that electricity is up around twenty five percent compared to twenty nineteen or pre pandemic levels, and natural gas is up twenty nine percent.
And one thing that you've noted is that the electricity cost increase has been fairly uneven across the United States. What states are seeing the biggest increases, What states are seeing fairly minimal increases.
Electricity bills are rising the fastest in areas like California and Maine. In California, bills are up around fifty one percent from the most recent data that we have from the US Energy Information Administration. And you'll see sort of normal price growth in areas like the Midwest, where they're only seeing around like two to ten percent increase in their bills, but main is also a really high one.
You've seen bills increase by forty two percent. Some of that change or unevenness in the growth is sort of due to where these power sources are being pulled from California has historically always been one of the most expensive states for utilities, and that has to do with various cost structures and fixed costs that aren't associated with actually how much energy that you're pulling. And another thing is seasonality. As we deal with climate change and summers get hotter,
you're running your AC units more in the winter. If it's colder, you're going to keep the keet up. So these external factors are also playing a real role in these rising costs.
Yeah, extreme weather in either direction just means more powers consumed to make it a comfortable environment. Other essential bills, like the premiums on car insurance and health insurance have also gone up. Give us an overview on what's happening here because it goes pretty deep.
So car insurance is up quite a bit.
We see it's up around thirty three percent, and that's pretty out of line with historical baselines that we've seen. From twenty sixteen to twenty nineteen, we only saw a growth of about twenty percent, and part of this is also due to the cost that it takes to now replace parts of these cars. We have faced a real supply chain issue in the last couple of years when
it comes to the shortage of chips or semiconductors. So all of these have these downstream effects that are hitting the consumer harder.
I also think that the labor shortage has a lot to do with it, because it's hard to find technicians in auto repair shops or in hospitals, and that increases the costs for the hospitals or the body shops that employ them, and of course then the end user, the consumer, ends up paying for that too.
Definitely, there's certainly compounding effects that all again trickle down to higher costs for the consumer.
You also write that borrowing costs have become a lot more expensive. We know the Federal Reserve has raised interest rates a number of times at the most aggressive pace in a generation, but that is leading to higher rates for things like card loans and.
Credit cards as well.
Talk about the cumulative effect of all these higher interest rates and what it means for household budgets.
Yeah, again, it's this cyclical nature, right.
Your everyday expenses have gone up a ton, your wages haven't kept pace.
You don't know if you'll.
Always be able to pay off your credit card balance, and if you don't make that payment on time, interest rates and borrowing on that line of credit has never been more expensive than it is now. It's this repeat cycle of things getting harder and harder, and it's just really affecting the consumer in a way that we've never really seen before.
Yeah, if you have to service debt, if you have credit card debt, at one point the rates were high, you knew you were paying for it, but at the current rates, it's something that takes a bigger percentage of your budget and it just becomes extremely painful to have to service that debt at a time when your wages aren't covering the higher expenses for everything else.
And I think you're starting to see how those higher interest rates are impacting Americans so at the same time that you know they're facing the higher costs of virtually everything, and servicing those debts has gotten more expensive because of higher interest rates, as well as the fact that there's the resumption of student loan debt and some of these other factors that are coming into play as well. You've started to see delinquency rates really start to climb again.
And when thinking about what happened during the pandemic, delinquency rates really went down a lot because people suddenly had money to be able to pay down these debts, and some folks had savings cushions for the first time in their lives or at least in the kind of recent asked. And you're starting to kind of see this return to trend.
And it's not quite clear whether the increase that we're seeing is something that's more of a return to normal or the start of something that's a lot more concerning in terms of where things are heading, But there's certainly some indications that there are reasons for concern. One thing that really stuck out to me because my colleague Alex Tanzy wrote a really smart story talking about how folks are increasingly tapping their retirement savings to cover their bills.
So last quarter we saw more workers take what's known as a hardship withdrawal, and the top two reasons for this uptick of people tapping these savings was to avoid foreclosure or eviction and for medical expenses. So these things are really starting to weigh on folks, and it will be interesting to see kind of where we go from.
Here coming up. Could the state of our household budgets play a role in determining the twenty twenty four election. You mentioned how there was this cushion that government stimulus and of course are not being able to go out allow people to build.
Up during the pandemic.
What do American savings look like right now in late twenty twenty three.
So the latest data that we have from the Federal Reserve is up to the middle of twenty twenty three, so that's kind of our latest snapshot and on a nominal basis, so not adjusting for inflation, we saw that aggregate savings are still up compared to where they were in the first quarter of twenty twenty. But I think something that's important to keep in mind, especially when we talk about savings, is what happens when you inflation adjust them,
as well as who is holding these savings. So while it was really stunning, an amazing and a true silver lining to see that folks across the income ladder were able to save more during the pandemic, roughly two thirds of the total deposits as of mid twenty twenty three are held by the top twenty percent of earners, so you know, you're really starting to see that inequality come back. But it's also worth noting that after adjusting the data
for inflation. That level of bank deposits and other liquid assets were lower in June than they were in March twenty twenty for the vast majority of households. So it's important to keep that context as well in terms of when we think about how far that money is going. And it really goes back to that statistic that Jenna said at the beginning of our conversation of one hundred dollars in January twenty twenty is about the same as a one hundred and nineteen or so today.
What is the San Francisco FED saying about the state of the savings of US households.
So San Francisco FED has come out with some great analysis over time about the state of what we call excess savings, which is, you know, the extra savings relative to the pre pandemic trend. And they had originally estimated that those savings would be fully depleted this year, but with revised figures they show that it's not likely to
be the case until twenty twenty four. But something that I think is important when we think about excess savings and why, in my opinion, it's maybe not always the best way to think about it is that it depends a lot on what that pre pandemic trend was. So we saw these big revisions by the Bureau of Economic Analysis that led economists all across Wall Street to have to revise their estimates on how much of these excess
savings were left. And so the fact that the San Francisco FED thinks that there's more access savings left now than they did before is not because families saved more than they previously thought during the pandemic. It's because they saved less before COVID nineteen.
And regardless of when these excess savings eventually run out, we're already seeing that the aggregate increase in savings for all income groups peaked in the beginning of twenty twenty two, and we can already see in the data that that padding for every single income group has been thinning over time.
So this creates an interesting situation in which you look at the economy and it is growing overall, and there do seem to be plenty of jobs available if you look at the latest data, and the White House President Biden in particular, of course, trying to push this idea of Biden nomics and how the economy is doing well
when people don't feel like it's doing well. What role will this persistent inflation that we've seen since early twenty twenty play with the economy as a big, big wedge issue for voters in twenty twenty four.
So there's a well known adage that was coined back in the nineties that says, it's the economy stupid, And according to a poll by Bloomberg and Morning Console, it very well maybe when it comes to the election. So four and ten swing state voters said the economy was their top issue in the twenty twenty four election. But at this moment, how you feel about the economy very much depends on whether you're focused on the jobs market,
which is characterized by historically low unemployment. We've seen some moderation, some cooling, but still things look pretty good there, or inflation, which, as we know, has improved but has left prices so
much higher. I really liked this comment by Betsy Stephenson, who is a professor at the University of Michigan and a former chief economist at the US Department of Labor, and she smartly put this in a recent piece that she wrote about American's frustration with the economy, and instead of it's the economy stupid, she wrote, it's the price is stupid. And I think that was a really good way of framing how folks are looking at the economy right now and why they are so frustrated.
I think that being said, whether this issue with Bidenomics is a substance stive issue or more of a marketing issue, Swing State voters are definitely still torn on whether Bidenomics is actually good or bad for the economy. The share of respondents who said by days was bad for the economy, and an October poll of Swing state voters with Bloomberg News and Morning Consult, forty nine percent said Bidenomics was bad for the economy, So voters definitely appear to be quite split on the issue.
When biden tries to talk about Bidenomics, is he pointing to the slowdown in inflation as his success? Is that what he's saying, look at what we've done here.
I think it's the combination of looking at a historic recovery in the economy from an unprecedented recession, frankly, and how many jobs have been added, how low unemployment has been for a long time, how much wages have grown after years of wage growth being rather tepid, as well as the fact that inflation has come down a lot since last year, and we've reached a point where instead of folks talking about a recession like its inevitability, folks
are rather split on whether we'll see a recession in twenty twenty four or not. So there is a lot to like about this economy. Me it's growing, and we saw a really fast pace of growth in the third quarter, But that doesn't change the fact that Americans hate inflation, and folks have not experienced inflation to the caliber that we've seen in decades. And there's kind of a saying
that's unemployment happens to your neighbor. Inflation happens to everyone, And I think that is something that is very much top of mind when we think about these issues on a political level.
How are you thinking about the inflated cost of living and whether it starts to ease or how it starts to ease. What will you be watching for as all the data trickles in each month.
So from where we are, as Jenna put earlier, when we talk about inflation getting better, that doesn't mean that prices are going down. It simply means that prices aren't
rising as fast as they were. So in order for Americans to really feel like they are better off and that they can look around and be happy with what they're looking at, you need to see consistent wage growth that's higher than inflation, and so recently we've seen that wage growth is outpacing inflation, which is a really good thing. You need to see a lot of that, and it needs to continue for a long time. So there's not
a simple fix. It's more of a fix over time, and it's something that dependent on whether the economy can continue to grow and we can continue to see that labor market strength will really depend on how Americans feel well.
Thank you very much, Jenna Hawk on Bloomberg's data visualization team and Read Picker with Bloomberg's economy team.
Thanks for having us, Thanks so much.
For having me.
Thanks for listening to us here at the Big Take. It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, Bloomberg CarPlay, or wherever you listen, and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot Net. The supervising producer of The Big Take is Vicky Bergalina. This episode was produced by Federika Romaniello, with production support from Sam Gabauer and Mo Barrow. Hilda Garcia
is our engineer. Original music by Leo Sidrin. I'm Scarlet Fou. We'll be back tomorrow with another Big Take.