Annual Inflation Rate Moves to 3.1%

Inflation fell in January to 3.1 percent year-over-year, missing some economists’ estimates that it would fall below 3 percent for the first time in nearly three years.

The Consumer Price Index (CPI) for all items rose 3.1 percent for the 12 months ending in January, before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) reported Feb. 13. That’s down from the unadjusted 3.4 percent annual gain seen in December—and a significant improvement from the 9.1-percent high notched in June 2022.

On a monthly basis, the CPI rose 0.3 percent in January, seasonally adjusted, after rising 0.2 percent in December. That figure is also higher than analysts expected.

The monthly rise was largely due to stubborn shelter and food costs: The index for shelter continued to grow in January, rising 0.6 percent and contributing over two-thirds of the monthly all items increase, the BLS reported. The food index grew 0.4 percent in January.

Core inflation—which accounts for all items minus food and energy—rose 3.9 percent over the last 12 months, the same for the 12 months ending in December.

The Federal Reserve closely watches the CPI report as it determines how and when to cut interest rates. Although things have improved drastically on the inflation front over the past year, other recent research continues to point to inflation’s persistent toll. Employees are still suffering from sticker shock, while employers say inflation remains their biggest challenge.

Inflation and its impact on their organization’s budget—especially on wages and hiring—continues to be employers’ primary concern, according to the 2023-24 SHRM State of the Workplace Report released Feb. 8. The survey of 2,028 HR leaders found that inflation was overwhelmingly their organization’s top concern of 2023, with 73 percent citing it as such, higher than other top concerns including employee mental health, labor shortages and the economic slowdown.

“SHRM has found that inflation and talent shortages are still significant workplace concerns among employees and employers alike,” said Johnny C. Taylor, Jr., SHRM-SCP, SHRM president and chief executive officer.

And a Monster report recently found that the vast majority (81 percent) of workers don’t believe their current wage has kept up with the rising cost of living.

Meanwhile, real average hourly earnings increased 1.4 percent, seasonally adjusted, from January 2023 to January 2024, the BLS reported separately today. The change in real average hourly earnings, combined with a decrease of 1.4 percent in the average weekly hours, resulted in a 0.1-percent decrease in real average weekly earnings over this period.