- In May, the Consumer Price Index rose 8.6%.
- That's the highest annual increase since December of 1981.
- Despite high levels of inflation, a fourth stimulus check doesn't appear to be in store for struggling Americans.
Inflation levels just reached a multi-decade high.
At this point, most consumers are well aware that the cost of living has soared over the past year. But some may not realize just how expensive life has gotten.
In May, the Consumer Price Index, which measures changes in the cost of consumer goods, rose 8.6% compared to where it sat a year prior. That's the highest annual increase since December of 1981.
Contributing to that gain were food, gas, and energy costs. Shelter costs also rose at their fastest pace in 31 years.
Because inflation has been so out of control, many people are calling on lawmakers to provide relief in the form of a fourth stimulus check. But that's not on the table right now. And in fact, it could end up making the problem of inflation even worse.
Americans are struggling
When living costs start to climb, those who can't keep up are often advised to cut back on non-essentials -- things like leisure and vacations. The problem today, however, is that the cost of everything is up, and many people are having a difficult time covering bare-bones expenses like food, housing, and utility bills.
Let's remember that many Americans used up their savings during the early part of the pandemic, when unemployment was rampant. As such, they don't have cash reserves to tap to keep up with rising costs.
Furthermore, while the economy is strong from a jobs perspective, wages aren't growing at a fast enough pace to keep up with inflation. And also, some of the people who were pushed out of the labor force in 2020 may still be jobless due to an inability to secure affordable childcare. As such, a lot of people really are struggling in the absence of government relief.
A fourth stimulus check could make things worse
While a fourth stimulus payment might seem like a good solution to the problem at hand, it may only end up making matters worse. In fact, a big reason we're in this mess right now is that last year, Americans received stimulus funds at a time when supply chains were sorely backlogged. At that point, consumers had more money to spend than available product, and so the cost of goods started to climb.
That, in turn, fueled an ongoing trend. Because jobs have been abundant and consumers have had more spending power over the past year, consumer demand has generally exceeded supply. And when you have that sort of disconnect, consumer prices rise -- in this case, at a very rapid clip. If the federal government were to issue a fourth round of stimulus checks, it might only exacerbate the problem and drive inflation up even more.
Of course, it's easy to argue that a targeted round of stimulus funds for struggling low-income households might be a solid middle ground solution. But it could also be a cumbersome one to pull off. And so unfortunately, a lot of people might continue to struggle financially until inflation levels taper off and costs begin to come down.
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