Inflation Rose More Than Expected in March

Inflation has crept up again for the second consecutive month, signaling that cost-of-living pressures that have been afflicting employees for nearly two years are persisting.

The Consumer Price Index (CPI) for all items rose 3.5 percent for the 12 months ending in March, before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) reported April 10. That’s a hotter reading than expected and up from the unadjusted 3.2 percent annual gain seen in February.

On a monthly basis, the CPI rose 0.4 percent in March, seasonally adjusted, after rising 0.4 percent in February. Core inflation—which excludes the more volatile food and energy prices—rose 3.8 percent year-over-year.

Prices in shelter and gas, in particular, contributed to the hotter-than-expected inflation reading. 

Andy Biladeau, chief transformation officer at SHRM, said the numbers reflect continued choppiness with inflation, which is leading many organizations to expand their parameters for scenario planning exercises. Specifically, he said, workforce planning forecasts are being modeled for larger variations in labor expenses and cost of goods sold to account for the widened range of possible outcomes.

The latest report signaling inflation is rising again comes as employees continue to express anxiety and stress over their financial situations. MetLife’s 22nd annual U.S. Employee Benefit Trends Study, released last month, found that employees are experiencing more mental health struggles and overall negative feelings about their work due to factors including financial stress and persistent high inflation.

Many employers have handed out healthy pay raises over the past two years in an effort to combat high inflation—while also trying to hold on to talent in a tight labor market—although as inflation has fallen and the labor market stabilizes, many employers have signaled that they are tempering aggressive pay hikes. A recent Gartner survey of employers found that while most chief financial officers (58 percent) are planning 4 percent to 9 percent pay increases in 2024, that’s a notable drop from the 70 percent who had planned to do the same last year. Fewer companies, too, plan to give out 10 percent increases (13 percent of employers, compared to 16 percent in 2023), according to Gartner.

Real average hourly earnings rose 0.6 percent, seasonally adjusted, from March 2023 to March 2024, the BLS reported separately today, down from the 1.1 percent rise reported in February.

The change in real average hourly earnings combined with no change in the average workweek resulted in a 0.6-percent increase in real average weekly earnings over this period.