Dec 11, 2021 - Economy

100-year lens on inflation

Consumer price index
Data: Bureau of Labor Statistics. Chart: Baidi Wang and Felix Salmon/Axios

Massive economic disruptions cause massive price volatility. That's the lesson of the past 100 years of consumer prices, according to data from the Bureau of Labor Statistics.

Why it matters: By the standards of global disruption — two world wars, the Great Depression, the oil-price shock of the 1970s — today's 6.8% inflation rate, the worst since 1982, seems positively tame.

  • But that doesn't help consumers who suddenly find higher prices for almost everything.

Between the lines: Americans' average hourly earnings are at an all-time high of $31 per hour, up 4.8% from a year ago. When inflation is running at a 6.8% pace, however, that works out to a 2% reduction in real wages.

What happened: The pandemic upended the global economy. The whole world came to a physical and metaphorical halt. Supply chains were severed. Central banks reacted with ultra-aggressive monetary policy, pumping trillions of dollars into the global economy in order to prevent it from seizing up.

What we're watching: Markets are concerned, but nowhere near panic. Investors expect inflation to average 2.44% over the next 10 years. Their longer-term outlook is for lower inflation than expected pre-pandemic.

  • But the lesson of history is that when the world experiences a shock of this magnitude, consumer prices can remain volatile for some time.
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