By Jim Cline and Kate Kremer
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.
Numbers released last week by the Bureau of Labor Statistics report Seattle inflation (CPI-W) at 1.1%, up from the -0.2 in April. The All-Cities-W was much lower and remains negative: -0.4%. That negative number, though, is higher than the -0.8% reported in April. Both of those reports show a dramatic decline from June 2014 in which the numbers reported were 2.2% and 2.0%, respectively:
One mildly interesting aspect of the latest CPI report is that the “U” index, uncharacteristically, was showing a significantly higher rate of inflation. Both indices were a full half percent above their W counterparts: 1.6% for the Seattle U index and 0.1% for the All Cities U index. In our next article, we’ll discuss the differences between the W and U indices. Labor contracts more commonly rely upon the W indices. As we’ll discuss in the next article, usually the differences between these measurements are small, often just .1 or .2 so the difference reported here is surprising and noteworthy (although not necessarily at all an indication of any future trends).
The table below shows the latest CPI data for the various indices used in Washington public safety labor contracts:
| CPI INDEX* | CPI-W | CPI-U |
| All-Cities (June 2015) | -0.40% | 0.10% |
| Seattle (June 2015) | 1.10% | 1.60% |
| West Coast (June 2015) | 0.70% | 1.10% |
| West B/C (June 2015) | 0.20% | 0.50% |
| Portland (Second Half 2014) | 2.40% | 2.10% |
What does this low CPI report mean for labor negotiations? That’s also a topic we’ll take up in a future article. CPI is just one factor, among many, used to settle contracts. Clearly, settlement trends are running well above these inflation numbers. In our July 13 blog post on recent settlement trends we reported that so far 2015 settlements for most public safety employees were in excess of 2%. There are current economic trends, including the growing economy and tightening labor market, which would indicate a continuation of strong settlement trends. This inflation data, however, is a counter indicator. As we’ll discuss in a future article, for many bargaining units, considering all the relevant factors, a 2016 settlement at 2% may be solid. These low inflation numbers will push some settlements below 2%, rather than the more recent trend towards settlements above 2%.
As we’ll also discuss in a later article, there are other indicators that future inflation may be markedly higher. So, especially if you are negotiating wage settlements into 2017 and beyond, you should be alert to not accepting these latest low inflation numbers as a baseline for those out-year settlements. The June 2016 CPI report may look dramatically different.
We have said many times, “knowledge is power.” Awareness of the latest trends is an important piece of information you want to have when you negotiate. An awareness of possible future trends may be even more important to have, especially when you are negotiating a multi-year contract. We’ll continue to bring you information about what trends we see developing. In another blog article published today, we report on the general labor market conditions and the recent (above inflation) growth in wage rates.
**Find even more CPI data on our premium website.
**The premium website also contains the latest statewide wage standings and settlement trends data.
