How much you have to make to be considered middle-class in America
As inflation rises, more families struggle with financial insecurity, thinning the line of what kind of income constitutes being middle-class.
Inflation eased more than expected in October as falling gasoline and used car prices offset another rise in rent and a rebound in health insurance costs.
An underlying measure of price increases that the Federal Reserve watches more closely stayed elevated but also pulled back, possibly bolstering the case for the Fed to continue to hold rates steady after a flurry of aggressive hikes.
Consumer prices overall rose 3.2% from a year earlier, down from 3.7% in September, according to the Labor Department’s consumer price index. That pulled inflation closer to the more than two-year low it reached in June and July, before a surge in gasoline prices. On a monthly basis, prices increased were unchanged following a 0.4% rise the previous month.
Core prices, which strip out volatile food and energy items and which the Fed follows more closely, rose 0.2% after 0.3% bumps the previous two months. The advance pushed the annual increase to 4% from 4.1% in September, the lowest since September 2021.
Since reaching a 40-year high of 9.1% in June 2022, inflation has come down substantially but largely moved sideways in recent months.Prices for goods such as used cars and furniture have dropped as pandemic-related supply-chain snarls have unwound. But the cost of services such as rent, car repairs and auto insurance, have continued to edge higher in part because of swiftly rising employee wages tied to labor shortages. Last month, however, inflation slowed more dramatically.
Driving down inflation to the Fed’s 2% goal is still becoming more challenging than it was several months ago. Barclays expects inflation broadly to dip to 3.5% in December and 2.6% at the end of 2024. Core price gains are projected to end the year at 3.9% and close out 2024 at 2.9%, higher than the research firm previously projected.
Barclays expects the Fed to raise its key interest rate once more in early 2024, by a quarter percentage point, after hoisting it by 5.25 points in 16 months.
But other economists say inflation’s drop last month, along with falling wholesale costs and a cooling job market will trigger a faster pullback in inflation, prompting the Fed to stand pat.
Gasoline prices dropped 5% in October after rising 2.1% the previous month and they’re down 5.3% from a year earlier. Pump prices are well below their $5 peak in summer 2022 but surged in August on higher oil prices amid a brighter global outlook and OPEC production cuts.
Recently, gas prices have fallen as the busy summer driving season ended and refiners began using cheaper winter gasoline blends. Regular unleaded prices averaged $3.36 nationally Monday, down from $3.63 a month ago.
In the months ahead, however, lean oil supplies and healthy demand could drive pump costs higher, Barclays says.
Will grocery prices go down?
Grocery prices rose 0.3% after two months of more modest increases but that still lowered the yearly advance to 2.1%. The cost of commodities such as wheat and corn generally have come down this year as major producers Ukraine and Russia have found alternative shipping routes that skirt their 18-month war. But severe weather has disrupted supplies recently.
Last month, the price of several proteins jumped. Uncooked ground beef was up 1.5%; bacon, 1.8%; and chicken, 0.3%. Breakfast cereal was up 0.6% and bread leaped 1%.
Some staples provided consumers some relief. Rice prices declined 0.9%, fresh fish and seafood dipped 0.1%, and cookies fell 1.1%.
More on inflation
For more questions and answers about inflation, keep reading.
What is a depression vs. recession?
Unfortunately, there isn’t a set answer.
A recession is typically described by economists as a major decline in economic activity that lasts more than a few months. Usually, the downturn shows up in real GDP, real income, industrial production, the labor market and wholesale-retail sales, and is deemed a recession when there are two consecutive quarters of negative GDP growth.
Meanwhile, there’s no set definition for an economic depression, although it’s usually the term applied to a severe recession.
What is inflation?
Inflation is a “generalized rise in prices,” says Josh Bivens, director of research at the Economic Policy Institute, a left-leaning think tank headquartered in Washington D.C. The cost of items and services ranging from groceries, to health care, to gas can rise and dip depending on inflation.
New inflation tax brackets
Inflation may impact what tax bracket you fall into.
The Internal Revenue Service said in its yearly inflation adjustments report that there will be a 5.4% increase in income thresholds to reach each new tier in the 2024/25 tax season.
Next year, the lowest rate of 10% will apply to individuals with taxable income up to $11,600 and joint filers up to $23,200. The highest rate of 37% will apply to individuals making more than $609,350, and married couples filing jointly who earn $731,200 or more.
The IRS makes these tweaks every year, relying on a formula pegged to the consumer price index in order to deal with inflation and to stave off “bracket creep,” which occurs when inflation moves taxpayers into a higher bracket though they’re not experiencing any real uptick in earnings or buying power.
Next year’s increase is below last year’s 7% bump, but far more than recent years when inflation was lower than the 3.7% annual inflation rate U.S. consumers experienced in September.
How are stock futures reacting ahead of the inflation report?
Stock futures rose after the CPI report released at 8:30 a.m. ET. Dow futures gained 0.96% while futures tied to the S&P 500 rose 1.18%.
Cruise lines, too, are raising gratuity rates
Several major cruise lines have raised their gratuity prices in recent months, partly because of inflation. Royal Caribbean International began charging passengers $18 per guest, per day for non-suite staterooms Saturday, up from $16. Passengers in suites will pay $20.50, up from $18.50. The hikes follow similar moves from other cruise lines this year.
Inflation is prompting more Americans to take multiple jobs
The number of Americans working two or more jobs has reached its highest level since the pandemic’s start, a trend that suggests more of us are feeling inflation’s pinch.
Nearly 8.4 million people held multiple jobs in October, the Labor Department reported this month. They represent 5.2% of the workforce, the largest share of moonlighters since January 2020. Experts say people may be taking on extra work in response to inflation, which has outpaced wage growth through much of the past two years.
Inflation will blunt Social Security COLA boost in 2024
Inflation will more or less cancel out the annual cost-of-living adjustment (or COLA) in Social Security checks, seniors say, leaving many families struggling to keep up. Starting in January, more than 66 million beneficiaries will receive 3.2% more in their monthly checks, a bump that averages about $50.
COLA is meant to help Americans keep pace with inflation and maintain their standard of living. But many seniors say the Social Security hikes are falling short. For older adults, the biggest expense is health care.
Businesses are pressing for more tips to counter inflation
Tipping requests have exploded in the past couple of years, and inflation is one reason. After more than two years of rising consumer prices, businesses are feeling squeezed and looking to pass on expenses by requesting more tips for staff, experts say.
“Tipflation” takes many forms. Businesses prompt customers to leave large tips on checkout screens, or press for a tip on a takeout order. They may also calculate a tip on the after-tax amount, instead of the pretax total, or suggest a tip after adding an automatic gratuity to the bill.
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Read More:Inflation eased on lower gas prices. Live updates
2023-11-14 13:58:33
