National CPI Drops, but Seattle Stays Higher than Expected

By Jim Cline and Kate Kremer

Despite the pandemic and the associated recession, inflation has not completely disappeared, especially in the Seattle metropolitan area. This chart shows the month to month changes in the Seattle and All Cities “W” index from October 2019 to October 2020:

As you see the Seattle numbers hit a peak of 2.6% slide dramatically in June to 1.0% and has since bounced back. The October All-Cities 1.3% number is a bounce back from its 0.1% in April.

Not all Washington public safety labor contracts are tied to the Seattle or All Cities Index. Some use a “U” version of the Index, and some are tied to the various “West Coast” indices. Here’s a chart showing those numbers:

While the long-term inflation outlook calls for CPI to return to around 2%, the Seattle number hitting that level in the bit of a pandemic is a bit of a surprise. In an upcoming article, we’ll discuss future expectations for inflation, including the Seattle index, and how those may play into our overall bargaining decisions.

For more CPI data, current and historic, visit our Premium Website CPI page. In an upcoming Newsletter Article, we’ll discuss how we anticipate evolving economic conditions to impact negotiations. That discussion will include the continued reduction in local government revenues, a subject that we turn to next.

In previous articles, we’ve discussed the extent to which the Seattle and All Cities indices diverge and the relative advantages of each. It’s been a fairly consistent recommendation from our firm to use the Seattle index in preference to the All Cities index. As discussed, the Seattle economy has been relatively stronger than the national economy which, in turn, has driven the Seattle cost of living up at a higher rate. At this point, though, we are more guarded at which the future of the Seattle index and its an open question whether the Seattle growth rate will continue at the past recent rate or will align more closely with that of the general national economy.  There certainly are indicators that the period of rapid growth is ebbing.

Note that the “Seattle” index is not limited to the City of Seattle. It more broadly encompasses King, Snohomish and Pierce Counties. Therefore, the question will be assessing in the months ahead is the extent to which the broader metropolitan area will surpass national growth rates, not just what might occur inside the City of Seattle. 

And a whole different consideration is the extent to which you rely upon a CPI index in your negotiation at all.  In future issues, we’ll discuss broader economy and political trends that may impact your upcoming contract negotiations.