Many U.S. households are struggling to keep up with the growing cost of living as food and energy costs skyrocket.
Bureau of Labor Statistics data also highlighted the 41.6 percent jump in energy costs, which included a 98.5 percent spike in fuel oil, a 60 percent boost in gasoline, and a 13.7 percent rise in electricity.
Blacks, Hispanics Bear Brunt of Inflation
A recent report from the Federal Reserve Bank of New York assessed the annual inflation rate for the major consumption categories, clocking in at 9.2 percent in May. This was higher than the official CPI rate of 8.6 percent.When the calculations are adjusted for spending levels—Hispanic and black Americans will spend more on transportation and less on entertainment and health care compared to white and Asian Americans—inflation was higher for Hispanics and blacks. Researchers at the New York Fed Bank reported that the inflation rate for Hispanics was 0.6 percentage points higher than the overall rate, while blacks faced an inflation rate that was roughly 0.2 percentage points higher. For Asian Americans, it was approximately 0.5 percentage points less. The inflation rate faced by whites was about the same as the federal government’s CPI.
“We find that, in contrast to inequalities in employment rates, disparities in inflation rates have widened during the recent inflationary episode, with Black and Hispanic Americans experiencing more inflation,” the report reads.
“When overall inflation began rising in March 2021, inflation disparities surged, with Black and Hispanic Americans experiencing higher inflation than the national average and Asian Americans experiencing lower inflation. These disparities are more than twice as large as those observed during 2019.”
In 2020, before energy costs had skyrocketed, more than half (52 percent) of black respondents said they faced energy insecurity. A total of 47 percent of Hispanic and Latino survey participants also recorded the same challenges.
Within the newspaper’s survey results, 35 percent of nonwhite respondents reported that inflation would cause a substantial financial strain on their lives. A total of 28 percent of white respondents revealed the same sentiment.
The newspaper’s study also noted that nearly half of people earning less than $60,000 per year said inflation could cause problems.
Higher Prices Impacting Rural America
Inflation is a larger problem for rural communities than urban areas, according to a new in-depth study from the Iowa Small Towns Project at Iowa State University.“The current wave of inflation over the past two years has made rural families more vulnerable than urban ones to rising gasoline prices, higher fuel costs to heat their homes, and their ability to purchase less-expensive used cars,” the study reads. “Increased transportation costs are especially worrisome. Rural people have longer commutes to work, have to travel farther for daily needs like grocery shopping, and have to drive to larger cities for education and healthcare services.”
Researchers also noted that prices for automobiles, energy, telecommunication services, medical and pet services, and health insurance are rising faster in rural communities than in urban centers.
Fighting Inflation Through Layoffs?
The Federal Reserve has been fighting price inflation by raising interest rates. The U.S. central bank is poised to bring the benchmark fed funds rate to at least 3.25 percent by the year’s end.Experts say these inflation-busting efforts will still affect low-income consumers because they must contend with elevated inflation and higher borrowing costs simultaneously. A rising-rate environment can make it harder to obtain credit, borrow money, or service debts. This can ultimately result in lower demand and potentially a recession, because consumers will have less money to spend in an economy that’s two-thirds consumption-based.
But while the labor market continues to remain “hot,” Fed Governor Chris Waller told the Economic Club of Minnesota in May that the same people most affected by surging prices would be more likely to lose their jobs during the institution’s tightening cycle.
“We’re trying to lower the inflation tax on everybody, but there’s a small section of the society that may bear the brunt of that by losing their jobs,” he said. “There is no magical formula in a textbook that tells you how to do it. You kind of have to take your chances and see where it goes.”
Fed Chair Jerome Powell, while speaking to reporters following the Federal Open Market Committee policy meeting in June, said the central bank doesn’t intend to “put people out of work.”
“Of course, we never think too many people are working and fewer people need to have jobs. But we also think that you really cannot have the kind of labor market we want without price stability,” Powell said.