In our last article covering CPI we reported on the dramatic recent fall off in inflation (below 0%) numbers. We also predicted that, as to the pivotal June CPI report, the number would show an increase but that “we are not anticipating that these numbers will leap up anywhere near the 2% mark.” In fact, the June CPI numbers are out and they do show a turnaround in inflation numbers and numbers well short of the normal 2% mark.
This is the first of an 11 part series addressing current economic conditions and wage settlement trends. In this Summer 2015 Wage Series we’ll bring you an update on CPI and economic developments, wage settlements, interest arbitration trends, statewide wage rankings for public safety classifications across the State, and an in-depth analysis of what factors appear to be impacting those rankings and settlements.
More often than not, employers prefer a fixed percent COLA adjustment, as opposed to a number tied to the CPI. Having a fixed percentage COLA number written in the “out year” labor contract settlements provides the employer a “known” number to plug into their budgets. While your members have often preferred the ability to keep full pace with inflation, the recent falling and erratic CPI numbers pose a new question: Would you be better off with your contract settlements tied to a fixed percentage increase?
The recent fall off in gas prices has dramatically impacted the reported inflation rate. The most recent rate reported on the Seattle inflation numbers were through the end of 2014 and, following a dramatic fall in fuel prices, the Seattle number plummeted. Its high number for the year was 2.6% in April and by December that number had dropped to 1.1%. Even more dramatic was the drop of the All-Cities national CPI number to 0.3%. This chart shows the inflation numbers during the course of 2014.
In our last blog we reported that the Seattle CPI-W index had dipped slightly to fall closer in line with the national (All-Cities) index. The June Seattle Index was reported at 2.2 while the All-Cities index was 2.0%.
Last week’s BLS Report revealed a significant jump in the inflation rate. The April All Cities index was 2.0%, up from 1.0% in February. The Seattle index jumped from 1.3%, to 2.6% during the same two-month period. The numbers show CPI edging up over the past year.
Last week, we reported the sudden drop in the National and Seattle CPI numbers and also discussed the potential impact on 2014 and 2015 negotiations. In October, we had also written about the 2% inflation target established by the Federal Reserve Bank as they use monetary policy to attempt to control inflation. We explained how the Fed seems to be falling short on those 2% goals.
In our last blog, we reported the significant drop in inflation reported in the October CPI report. With current CPI standing at 0.8% and 0.6% for the “All-Cities” and Seattle index, respectively, how might this sudden drop affect bargaining?
