Inflation reported to have cooled in November
San José, CA – On Thursday, December 18, the Department of Labor released its report on inflation for November. The CPI-W report showed that the increase in prices for urban wage earners and clerical workers was 2.7%, less than the last report on September inflation of 2.9% (the October report was skipped because of the partial government shutdown). The broader CPI-U, which includes all urban consumers, including professionals, small businesspeople and retirees, also was 2.7%.
While this inflation measure was lower than economists expected, the report should be taken with a large grain of salt. One of the reasons that inflation came in lower than expected is that it reported that there was basically no change in housing costs between September and November. Housing costs, including rents and estimated costs of home ownership, make up over a third of the CPI. This flatlining of housing costs typically only happens during a recession, and more likely reflected problems with the statistical methods used for this report.
One change that would also lower the inflation rate is that the Bureau of Labor Statistics, or BLS, that collects the data for the inflation report, removed the cost of long-term care insurance from the index. With premiums reported to have gone up 24% on average in 2024, this would tend to lower the index.
The report as a whole had a very large number of blank entries, partly because the October data wasn’t available. While inflation rates for specific goods were reported, other services – such as gardening and lawn care, which has many immigrant workers and was up 13.9% year over year in September – were not reported. One service that was reported that also has many immigrant workers was elder care, up 10.8%, possibly reflecting Trump mass deportation efforts that are hitting occupations with many immigrant workers.
Another under-reported service was insurance, including car insurance. Health insurance premiums were reported to be up only 0.6% in November, year over year, while in September they were up 4.2% from a year earlier, suggesting that these insurance premiums went down in October and November – something that virtually no one is seeing.
Last but not least, while many specific goods were down in price, such as eggs, many others were still rising at double digit rates. Beef was up 15.8%, while coffee was up even more, with prices 18.8% higher than a year ago. Home energy prices were up 6.9% from a year ago, even faster than in September, where the year over year rise was 5.1%. This was in part due to the artificial intelligence data centers being built, which require massive amounts of electricity, with more of it coming from new or reactivated nuclear power plants, which are the most expensive way to make electricity in the United States.
Finally, because of late start, with data collection only beginning mid-month, at the end of the government partial shutdown, this report included Black Friday sales, unlike normal November inflation reports, which would have pulled down prices reported and lowered the inflation rate.