Southern California’s 6.6% inflation rate highest in 31 years – Orange County Register

The effect of inflation on a Southern Californian’s checkbook hasn’t been this hard in 31 years – a time when “Home Alone” was a blockbuster hit and George HW Bush was president.

Consumer prices in Los Angeles and Orange counties rose at a 6.6% annual rate in December, according to the Bureau of Labor Statistics. Everything from gasoline and household fuel to used cars and appliances and even entertainment becomes really expensive. Inflation has come a long way from 1.5% in December 2020.

These cost jumps are by no means a mere local phenomenon. National inflation hit 7% in December – the highest rate since 1981. In Phoenix, inflation is 9.7%, and in Seattle 7.6%. The Bay Area’s cost of living is relatively mild, rising only 4.2%. Inland Empire inflation, measured again in November, was 7.9%.

A strange combination of pandemic forces is fueling this inflationary rush. The economy is struggling to cope with persistent strains of the coronavirus, leading to shortages of workers and raw materials. Shoppers are weathering thin storage shelves and delivery delays due to supply chain challenges.

On the other hand, the demand for goods and services has skyrocketed because consumers are having a lot of cash. Hiring workers is pushing wages up. Government stimulus programs sent taxpayers checks and interest rate cuts, boosting the value of stocks and real estate.

My trusty spreadsheet says we’re living in a landscape where LA-OC’s overall cost of living has seen a dramatic reversal.

December’s spike came in a year where inflation averaged 3.8%. That’s more than double 2020’s 1.6 percent rate in a pandemic economy. During the strong economic period 2016-2019, this rate averaged 2.9%. During the 2009-15 Great Recession, it was 1.2%. Note that during the infamous bubble period – 2000 to 2008 – inflation averaged at 3.4% in LA-OC and the cost increase of 2.6% during the 1990s grew more slowly.

Inflation versus employment

Rising inflation is often a byproduct of a hot economy with high employment.

A sharp rise in the cost of living strangled the economy in the late 1970s and early 1980s, but inflation was also close to its highs today during the boom of the late 1980s and early 2000s. Take a look. CPI and its relationship with the job market.

California’s unemployment rate tended to fall before inflation spiked. Historically, when LA-OC inflation rises 2 percentage points or more in a year — which has happened 19% since 1976 — there’s a 73% chance the state’s unemployment rate fell in the previous 12 months.

Over the last year, the statewide unemployment rate dropped to 6.9% from 8.7% while in Southern California the unemployment rate dropped to 7.1% from 11.9%.

With fewer job seekers, local bosses have competed for talent by offering raises.

Southern California wages and salaries have grown at 6.5% annual interest rate for 12 months ending in September, up from 3.1% a year earlier, according to the Employment Costs Index. That’s the highest level in the index’s 15-year history, and #1 among the 15 major job markets studied.

That excess cash may offset some of the pain caused by inflation for consumers, but that higher wage is also a business cost that is often passed on to shoppers.

Where is the pain?

How inflation affects a household depends on how a family spends. Watch the price spike in December…

Fuel: By CPI calculations, gasoline in LA-OC has been 47% more expensive in the past 12 months. More driving, more demand because the key ingredient – crude oil – is still valuable.

Household energy: Electricity costs are 16.2% higher. Nature Air? More than 18.3%. Higher fuel costs are a big factor.

Vehicle: New? More expensive than 9.2%. Used? More expensive than 35.7%. A shortage of computer chips limits car production.

Big fare items: The cost of “durable goods” (such as appliances and furniture) is 10.2% higher. Manufacturers struggled to find supplies.

Dish: Groceries rose 8.1% as growers, packers, and distributors beat higher wage costs. Eating out is 6% more expensive. Restaurant owners face rising costs of labor and ingredients.

Entertain: Fun is 7.2% more expensive. Again, labor costs hurt.

Costume: Clothes are 6.2% more expensive. Product availability is less due to overseas factories slowing down due to the pandemic.

House: Having a roof over your head costs 4.6% more. Landlord increases rent.

Jonathan Lansner is the business columnist for Southern California News Group. He can be contacted at jlansner@scng.com