Seattle records biggest rise in inflation in three decades

Over the past year, inflation in the United States has hit its highest level in four decades, the Labor Department reported last month. In Seattle, the growth was even higher.

The Consumer Price Index, which measures the average change in prices of consumer goods and services over time, rose 7% in the United States in 2021 – the biggest increase since 1981. In Seattle, the Prices soared even faster at 7.6% – the biggest increase since 1998, according to the first available data from the Bureau of Labor Statistics department.

The Seattle area saw the biggest price increase since 1991 last year.

Seattle’s CPI over the past year has risen more than most other US cities.

The goods and services monitored in the CPI are everyday items, ranging from groceries to appliances, transportation or housing — often referred to as the consumer basket of goods and services. Items are weighted in a monthly or annual household budget to measure the rate of inflation, or how rising prices affect the average person.

Some items, like the price of gas, are known to fluctuate from day to day, while items like postage stamps can change occasionally with a small margin. When measuring inflation, economists pay particular attention to the least volatile elements.

In Seattle’s consumer basket, the cost of less volatile items such as used cars and trucks, furniture and appliances, and housing has increased significantly over the past year. The price of food and beverages increased by 8.9%, mainly due to the sharp increase in the cost of meat, poultry and eggs, alcoholic beverages and fruits and vegetables. As in the rest of the country, energy prices here have also jumped largely due to rising gasoline and natural gas prices.

This rate of gasoline price increases in 2021 is the highest recorded in the Seattle area since 2009.

Of the various weights assigned to dozens of goods and services, housing or housing weighs by far the heaviest. As of December 2020, its relative importance to other risk-weighted assets was over 40%.

Studies show that an increase in the price of housing services is more likely to affect young people, communities of color and low-income households, as they are more likely to rent. Similarly, an increase in used car and health care prices has a greater impact on these groups, as they are more likely to not be able to afford new cars, or not to be insured and that they probably have to pay medical expenses out of their own pocket.

Inflation is a case of “too much money for too few goods,” said Jacob Vigdor, an economist at the University of Washington Evans School of Public Policy.

The city has always been more expensive than other parts of the country due to, among other things, relatively high shipping costs in the Pacific Northwest.

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“When you think about what’s been happening here recently, not only has Seattle been more expensive than other places for a while, but the price level is now accelerating faster and outpacing other parts of the country,” said said Vigdor.

Wages and salaries have not kept pace with rising prices. In the Seattle area, the gap between the rate of growth over the past year and the increase in wages and salaries over the same period was 3.8 percentage points. In 2019, before the start of the pandemic, this gap was 0.9 percentage points.

And while Seattle’s CPI rose at a faster rate than most other cities, wages and salaries haven’t risen as quickly. Compared to other metropolises, Seattle has seen a smaller increase over the past year.

This accelerated price rise here is a reflection of a few factors, including the increase in household savings during the pandemic. Economists note that while federal stimulus money has been a contributing factor, it is not the main factor driving up prices.

The key factor is the labor shortage. “Statistically speaking, if you’re a job seeker right now, you’re going to find it,” said Anneliese Vance-Sherman, Seattle Regional Economist with the state Department of Employment Security.

Typically, during a recession, workers are laid off if there is less demand for their work, which leads to an increase in the unemployment rate. When demand returns, it usually returns to an abundant labor supply. But this time, while demand has returned, supply has not.

“The [labor] supply is still constrained by the uncertainty that is present with the COVID-19 pandemic,” Vance-Sherman said.

She pointed to the reduction in the number of women in the labor force during the pandemic as one of the factors behind the shortage.

“Many female-dominated professions were affected early on, and many women in particular stayed home to care for children with increased childcare constraints, such as online schooling,” said she declared. “A lot of those constraints are still in place.”

The high cost of housing in Seattle is also impacting the workforce, as some companies can’t find workers who can afford to live in Seattle at the wages they offer, Vigdor said. To find workers, he said, employers must pay premium wages — some of which is often passed on to consumers.

He added that the accelerated price growth could be a one-time disruption to the economy caused by the pandemic, and as life returns to normal, prices are expected to do the same.