Working Americans are paying more for the same or less every month, and the latest economic data shows the squeeze is only tightening — wholesale prices just posted their biggest annual jump in nearly four years, and the tab is coming due at your local grocery store and gas pump.
The government's producer price index surged 6.3% in September from a year earlier, with a stunning 1.3% leap just from August to September alone. That pipeline of pain runs straight from producers to your paycheck. Consumer inflation has already climbed to 3.7% — nearly double the Federal Reserve's 2% target. The Biden White House and its media allies keep pointing to "resilient" spending as proof the economy is strong. Look closer.
The anchor dragging this economy down is energy. Gas prices drove a 20% monthly surge in the wholesale index. Diesel — the fuel that moves literally everything by truck, train, and rail — averaged $6.32 a gallon nationwide as of Thursday, according to AAA. That's up from just $3.66 a year ago. As High Frequency Economics chief economist Carl Weinberg put it: "The jolt to transportation prices affects every good in the economy, since inputs to manufacturing move to factories and goods at all stages of production move from producer to wholesaler to retailer by truck, train or rail. This is how increases in energy prices 'bleed through' to prices of core goods."
Bleed is the right word. Farmers run their equipment on diesel, which means the food you buy is about to get more expensive. Wholesale food costs already rose 1.2% from August to September — the biggest monthly jump since February. That hasn't fully hit retail shelves yet. When it does, the grocery bill goes up again.
So what about that "resilient" consumer spending the press keeps touting? Retail sales rose 0.8% in August, beating forecasts. But strip out the 6.4% jump at gas stations — money people had to spend just to fill the tank — and sales rose just 0.2%. Most of that 0.2% reflects higher prices too, not Americans buying more stuff. The Anchorage Daily News and Pittsburgh Tribune-Review both ran the same wire story framing consumers as "muscling through" and "powering the economy." That's one way to put it. Another way: people are paying more for necessities and calling it resilience.
Jim Baird, chief investment officer at Plante Moran Financial Advisors, cut closer to the truth: "Consumers may have gritted their teeth and looked through higher gas prices. They're not happy, but they're still spending."
They're still spending because they don't have a choice — and because layoffs remain unusually low. Unemployment claims stayed below 200,000 last week, a historically low figure. People have jobs, so they keep paying the higher prices. But hiring itself is sluggish. The question neither outlet explores: what happens when the job market finally softens and Americans can no longer muscle through?
The Fed's 2% target is a distant memory. The producer price pipeline is loaded with costs that haven't reached consumers yet. And the establishment press keeps calling it strength. The paycheck tells a different story.
