The worst level of inflation in 40 years managed to get even worse in March. The consumer-price index rose 8.5% year-on-year, the worst since December 1981 — when inflation had begun to decelerate. Instead, the CPI’s internals suggest that inflation has only begun to accelerate.

So much for those pay raises that Joe Biden keeps touting:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.2 percent in March on a seasonally adjusted basis after rising 0.8 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.

Increases in the indexes for gasoline, shelter, and food were the largest contributors to the seasonally adjusted all items increase. The gasoline index rose 18.3 percent in March and accounted for over half of the all items monthly increase; other energy component indexes also increased. The food index rose 1.0 percent and the food at home index rose 1.5 percent.

The index for all items less food and energy rose 0.3 percent in March following a 0.5-percent increase the prior month. The shelter index was by far the biggest factor in the increase, with a broad set of other indexes also contributing, including those for airline fares, household furnishings and operations, medical care, and motor vehicle insurance. In contrast, the index for used cars and trucks fell 3.8 percent over the month.

Get ready to hear a lot about “core inflation” from media outlets, which strip out food and energy from the CPI. There wasn’t great news on that front either, but it wasn’t as bad as overall CPI, the New York Times pointed out:

A substantial chunk of the March inflation surge came because Russia’s invasion of Ukraine pushed fuel prices sharply higher last month, with the U.S. average for a gallon of regular gas peaking at $4.33 on March 11.

But gas is not the entire story. Stripping out volatile fuel and food, so-called core prices climbed 6.5 percent in the year through March, up from 6.4 percent in the year through February, also a brisk pace. Still, the core index offered a glimmer of good news: Core inflation slowed down a bit on a monthly basis, rising 0.3 percent from February.

That and five six seven bucks will get you a café latté at Starbucks, too. A leveling off of gas prices will certainly help, but consumers don’t experience “core” inflation. They experience “all items” inflation, especially at the grocery store and gas pumps.

Washington Post economics reporter Heather Long put all this in perspective, especially in the context of wages:

https://twitter.com/byHeatherLong/status/1513857761922142211

Wow.

"The food index increased 8.8%, the largest 12-month increase since the period ending May 1981."

The Fed might like to look at inflation without energy & food, but Americans sure don't look at it that way.

— Heather Long (@byHeatherLong) April 12, 2022

Furthermore, the month-on-month increase is the worst yet, the worst since the pandemic recovery began, and the worst since, well …

The all items index continued to accelerate, rising 8.5 percent for the 12 months ending March, the largest 12-month increase since the period ending December 1981. The all items less food and energy index rose 6.5 percent, the largest 12-month change since the period ending August 1982. The energy index rose 32.0 percent over the last year, and the food index increased 8.8 percent, the largest 12-month increase since the period ending May 1981.

Let’s take a look at the CPI components to get a sense of why we’re accelerating into inflation:

• Food overall: 1.2% month-on-month, 8.8% over 12 months
• Energy: 11.0% / 32%
• Electricity: 2.2% / 11.1% (so much for EVs!)
• Shelter: 0.5% / 5.0%
• Transportation services: 2.0% / 7.7%

Inflation is more than a story of gas prices…

Groceries +10% –> biggest spike since 1981
Meat/poultry/fish +13.8% ->biggest since 1979
New cars 12.6%->biggest ever
Electricity +11.1% -> biggest since '06
Home furnishing 10.8% ->biggest ever
Rent 5.1% ->largest since 1991

— Heather Long (@byHeatherLong) April 12, 2022

If you got a 5% annual wage increase lately, it’s barely keeping up with your housing costs and falling way behind your utility increases and grocery bills. That loss of buying power will force employers to increase wages, which itself is inflationary — the wage/price spiral that can create a hyper-inflationary cycle, if one has not already begun:

Solid demand for labor has shifted bargaining power toward workers, putting upward pressure on wages, which could feed into broader price gains. Annual wage growth was 6% in March, the fastest pace since records began in 1997, according to the Federal Reserve Bank of Atlanta’s wage tracker.

Still, wages for most are growing too slowly to offset inflation. This could push workers to demand higher wages, creating a feedback loop that puts upward pressure on inflation.

Take a look at the components of CPI above to see what that 6% does for consumers now. It gives them less buying power than a year ago on food, electricity, energy overall, and so on. Wage earners are losing ground every month in this inflationary wave, and the amount of ground they’re losing is accelerating every month as well.

Politically speaking, it’s a disaster, one that Biden and his team (and party) are desperate to slough off onto anyone else but themselves. They continue to trot out the “Putin price hike” line even though it’s absurd on its face, given that inflation began almost a year ago and not on February 24th. Their “Big Oil” and “corporate greed” lines have similarly flopped except among the progressives who at one point demanded massive price hikes in fossil fuels to allow alternatives to compete. (Not hearing much about that these days, eh?) Biden wants to get more ethanol into the market as a way to distract people from the fact that his administration curtailed exploration and extraction of oil and natural gas, removing the scalability of that production that would come in mighty handy at the moment.

The only thing left is for the Fed to start massive interest rate hikes. That will be a return to the Paul Volcker plan to use recession strategically, but if so, then time is of the essence. The longer the Fed waits to use that strategy, the longer it will take to tamp down demand and get inflation under control. When the recession hits, and it will at some point, Democrats will find themselves in even bigger trouble as wage pressures vanish along with inflation, and suddenly no one can afford to buy goods and services for a whole host of other reasons.