Inflation for Eating Out, Deflation for Eating at Home

Every month the Census Bureau releases the Consumer Price Index (CPI) data for the prior month. Yesterday Janet Yellen decided to raise the Federal Reserve interest rate by 0.25% partially based on keeping inflation around the 2.0% target rate that they have. It was also based on a "strong jobs data" and an unemployment rate under 5.0%. We have not had a strong labor market this year. The seasonal factors used to convert the non-seasonally adjusted data to the seasonally adjusted data have been skewed for months - artificially elevating the SA Current Employment Statistics worker data. The unemployment rate is a Fake Unemployment Rate. The unemployment rate of  4.43% today does not compare with the unemployment rate of 4.49% unemployment rate of November 2007, although people try to do so, because the Participation Rate then was 66.13% compared to 62.64% today.If we had 66.13% participation we would have 168,327,000 participants versus the 159,451,000 that we have right now. That difference of 8.833 million workers (participants) means that the effective unemployment rate is really 9.45%.

If the Federal Reserve is making decisions on faulty jobs data, could they be making faulty decisions based on false inflation numbers?

We are Seeing Inflation for Medical Expenses and Shelter, Again. This column, and its predecessor, have published numerous column on the shelter inflation and medical inflation that we have been seeing.  Last November the annual inflation was 3.2% for Shelter and 3.6% for health insurance. This November  we saw 3.6% inflation for Shelter and 6% for Health Insurance. Inflation on top of inflation is not a good thing. You will also notice from the Shelter and Medical inflation table that the weighting for shelter and medical insurance have risen. They are taking a bigger chunk out of our wallet.

We are seeing inflation for dining out and deflation for dining at home. There has been some discussion that there is a restaurant recession impacting all sectors of the restaurant industry, from fast food and casual dining up to fine dining. The broad category of "Food" combines the two and gives a misleading number 0f 0.4% deflation for all food. Food at home is down 2.2%. Food outside the home is up 2.3%. We eat more food at home that we do out to eat so the weighting pushes the total food picture negative. Spending on Food at Food and Drink places dropped 5% month to month and increased 5% year to year according to yesterday's MARTS report. That same report revealed that we increased our spending by almost 1% at food and beverage stores month to month and increased our spending there by nearly 4% year to year.  Are food costs increasing while eating out due to increases in other business costs, such as the Affordable Care Act?

We are spending  more money than we did during November 2015 - and more than they are reporting. If we spent $4000 the way that they say that we did during 2015 we would have spent $3943 dollars on the items listed. Based on how they say that we allocated our $4000 this year we would have spent $3976 on the same items. This is minor inflation. The problem is that if we spent the money the same way we did during 2015 and we factor in the inflation rates of the categories we would have spent $4014 on the same items we purchased last year. This is an inflation rate of 1.8%. We are spending $48 more on shelter this November than last November.We are spending $9-10 more on health insurance than last year. That is if you were spending $31 on health insurance during November 2015. That is crazy low.

We are spending less money on clothing, furniture and Recreation this year. The retail survey (MARTS) that was released yesterday reveal in addition to changes being observed in the food and beverage spaces that household furnishings and supplies increased November 2016 compared to 2015 while electronics and appliance dropped.

What does it all mean? The headline number was 1.7%. The actual number was closer to 1.8%. We are seeing shelter costs continue to skyrocket. Where will people cut spending to afford their rent or mortgage?Is anybody going to report on the medical inflation?

Its the economy.