Infographic: inflation hits 7% in December

Infographic: inflation hits 7% in December

The labor market is making rapid wage gains for most workers, but the red-hot inflation is slowly eroding those increases.

The Labor Department reported on Friday that average hourly earnings for all employees decreased by 2.4% in December from the same month a year ago, when factoring in the impact of rising consumer prices. When factoring in the 0.5% inflation spike, the average hourly earnings increased by just 0.1% in December.

The average U.S. worker is actually worse off today than it was a year ago, even though nominal wages are rising at the fastest rate in years. The consumer price index was up 7% from a year ago, the fastest increase since June 1982, when inflation hit 7.1%, according to the government on Friday morning.

The CPI, which measures a variety of goods, jumped by 0.5% in the one month from November to gasoline and health care, groceries and rents.

In December, core prices, which excludes more volatile measurements of food and energy, went up 5.5% from the previous year, a significant increase from November, when it rose 4.9%. It was the steepest 12 month increase since 1991.

Energy prices were up 29.3% from last year, although they fell 1.1% in December from the previous month. Gasoline costs 49.6% more than it did last year. Food prices have increased by 6.3% over the year, while used car and truck prices are up 37.3%. Shelter costs, which make up nearly one-third of the total increase, went up 0.4% for the month and 4.1% year-over-year, the fastest pace since February 2007.

Seema Shah, chief strategist at Principal Global Investors, said inflation at 7% is no joke. It is the highest annual CPI number since 1982 and is not driven by energy prices but by just about everything else. The inflation spike has been bad news for the person who has seen his approval rating fall as consumer prices go up. The White House blamed the price spike on supply-chain bottlenecks and other disruptions in the economy, while Republicans blamed it on the president's massive spending agenda.

Biden said in a statement following the data release that the decline in month-over-month inflation was 0.5%, but it was down slightly from the 0.8% increase in November as evidence of a reduction in headline inflation and falling food and gas prices.

The president said that this report underscores that we still have more work to do, with price increases still too high and squeezing family budgets. Inflation is a global challenge, which is commonplace in almost every developed nation as it emerges from the economic slump. America is fortunate to have one of the fastest-growing economies.