Heritage Foundation’s EJ Antoni shared this graph of the CPI level:
Aside from including the pandemic era price level, I thought about what happened to real wages. These have risen faster post 2022M07.
Figure 1: CPI deflated average hourly earnings (black), and 2017M01-2019M12 trend (red), and 2022M07-2024M12 trend (light blue), in 2023$. Stochastic trends estimated on logged values. NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED, NBER, and author’s calculations.
I suspect there is an important behavioral econ effect at work in why so many people felt so poorly about wage increases during Biden’s term.
Consider two scenarios:
1. Over 4 years, prices rise 8% (2% per year) and wages rise 10%.
2. Over 4 years, prices rise 28% (7% per year) and wages rise 30%.
In both cases real wages have risen 2%.
But I suspect a large majority of people would feel much better about scenario #1 than #2. Because in #1, their perception probably is that they got wage increases while prices remained basically stable; while in #2 their perception would be that inflation was bad and their wages barely kept up.
It’s all perceptual, but people have won Nobel prizes for that sort of thing!