CINCINNATI — Your dollar isn't stretching as far as it once did. One labor economist said wages just aren't keeping up with inflation, more than likely impacting how people spend their money.
"So what that means is that today, consumers can purchase about 2% less than they could a year ago," said Dr. Michael Jones, an economist and associate professor at the University of Cincinnati.
Jones said supply chain issues from the pandemic, demand and now a war overseas are driving up prices on some everyday items.
"It's primarily being goods relative to services, and these are used cars, new cars, furniture, food at home," Jones said. "All of those categories are above the average inflation of 7.9% services like healthcare and education is actually quite low."
WCPO 9 News looked at the Consumer Price Index Summary provided by the Bureau of Labor Statistics. Overall inflation is at 7.9%, but the change in the price of used cars over the past 12 months coming in at a whopping 41.2%.
"In certain sectors, some of the supply chain disruptions are being resolved, but in a lot of cases we're still seeing, pent up demand," Jones said.
He also points to the drastic mark-up in home prices also putting a squeeze on people's budgets. And for sectors that can't meet demand, the only way to respond is to increase prices. It's similar to what the Federal Reserve is doing with interest rates. This essentially prices people out.
"They're no longer able to afford that new car and as demand starts to drop because they can't afford the borrowing costs. Then you're gonna start to see those prices go down," Jones said.
Jones also brought up soaring oil prices, primarily because of the Russian invasion of Ukraine. He said this could be a bargaining chip for employees who'd like to work from home since wages are only seeing a 5% increase.
"They're not having to commute into work, maybe now they're not having to worry about child care, for example," Jones said. " I think the other implication of work from home is that hopefully it'll start to relieve some of the pressure on energy prices."
Jones said the Russian invasion of Ukraine could impact the agriculture sector because they produce a large percentage of items like wheat and fertilizer.
READ MORE
Shoppers prepare to recalculate budgets as inflation hits 40-year high
How rising interest rates could impact credit cards, home and car financing
