March 24, 2025 by

February CPI Release Reports Slight Easing of Inflation — For Now

By Jim Cline

The Bureau of Labor Statistics released their bimonthly inflation report March 12 showing inflation through February. Most economists had projected that All Cities CPI would be around the 3.0% mark reported in the January inflation report but instead a slight dip was reported. Another notable trend is that, as we have been anticipating, the Seattle indices have continued to slow, and Seattle area inflation is reported as slightly less than national numbers.   

Read more: February CPI Release Reports Slight Easing of Inflation — For Now

This graph shows the bimonthly movement in inflation over the past year, including the latest numbers:

The numbers above drive many contract negotiations, but they are not the only numbers in use. This chart shows some of the other often used indices including the “U” numbers and the West Coast numbers:

Absent a significant economic slowdown or recession (discussed below), many economists anticipate that upcoming inflation reports will be higher, probably north of 3%. While inflation had been expected to continue its trajectory towards the Fed’s 2% inflation target, the surging tariff wars and expected to create some bump in inflation. Almost all economists agree that increased tariffs will create an increase in inflation, but they differ as to the extent and how long lasting the inflation impacts will be. This morning’s CPI report may represent the low point in inflation for the year.

Last week’s University of Michigan consumer sentiment survey also showed consumers anticipating more inflation ahead. Inflation expectations are problematic because they influence the direction of inflation. Economists believe expectations of higher inflation spur wage demands which create higher levels of inflation.

In the next newsletter article, we’ll address other economic developments impacting bargaining.

Filed Under: CPI, Economic Developments, Economics
December 3, 2024 by

Seattle CPI Moves Closer in Line with National CPI

By Jim Cline and Kate Kremer

The latest CPI data shows a continued easing in inflation. The period of higher inflation of the past few years seems to be ending at least for now. And the large gap that had existed between the City and All Cities CPI also seems to be closing.

Read more: Seattle CPI Moves Closer in Line with National CPI

This chart shows the most recent CPI released earlier this month by the Bureau of Labor Statistics, along with the 12-month bi-monthly numbers:

For most of the past year, the Seattle CPI has outpaced the national numbers by more than one percent. A year ago, the Seattle and All Cities W index were 4.4% and 3.1%, respectively. As shown, those numbers are now 2.7% and 2.4%. 

Here’s a summary of both the “U” and “W” numbers on a range of CPI formulas most commonly used in Washington public safety contracts:

Since the heightened CPI over the past few years has led to an increase in overall settlement trends, we are anticipating these new, lower numbers will likely lead to a reduction on those trends. But there are many variables impacting those trends. One major factor is that a number of jurisdictions which settled contract at far less than CPI over the past few years are likely to negotiate for some type of “catch up” increases. So far, the preliminary data we are seeing for 2025 settlements show many settlements at 4% or more. We will follow up with another report soon on those developments.

Filed Under: CPI, Economics
August 29, 2024 by

Why are the “Seattle” indices important and What’s up with them?

Why are the “Seattle” indices important and What’s up with them?

By Jim Cline and Kate Kremer

In the last couple of articles, we discussed the recent BLS June CPI data and why the June CPI numbers have outsized importance. In this article we discuss the so-called “Seattle” CPI index. There’s often confusion about exactly what the “Seattle” CPI index is and how it impacts negotiations around the State. We’ll address those questions today.

Read more: Why are the “Seattle” indices important and What’s up with them?

First of all, The Seattle indices (“U” and “W”) do not cover simply costs within the City of Seattle but cover use sampling from all of King, Snohomish, and Pierce counties. BLS used to include adjacent urban Counties in the Seattle CMSA region like Kitsap and Thurston but eventually narrowed the reach of this index.

Still, because those adjacent areas likely have their cost of living impacted more by Seattle Metro trends than national trends, it is common to use the “Seattle” numbers used in negotiating contracts throughout Western Washington and even sometimes in Eastern Washington. Housing prices and other components of the cost of living throughout the State are much more likely to be influenced by what’s happening in the Seattle area than what is occurring in the Midwest or East Coast. And when you are using comparables that are located inside the Seattle Metro area, it’s likely that you are looking at the trends and expected trends for those contracts.

We have written on many occasions there’s been a long-term tendency of the Seattle indices to outpace the national indices. What’s been noteworthy recently is how much that has occurred. One year ago, the All-Cities CPI was 2.3% while the Seattle number was 4.5%. While it is not uncommon for the Seattle numbers to outpace the national numbers by a fraction of a percent, that 2.3-point difference is remarkable and, as we expected, not likely to be long sustained.

We had expected (and predicted) some closing of the gap in this report, but this gap is closing even faster than we had predicted. We had more recently been expecting Seattle June numbers at or just about 4%, maybe even higher. These numbers coming in under 4% likely show the levelling off of housing prices, the factor that creates the biggest over difference between the national and Seattle formulas.

That’s the look backwards. Looking forwards, we are expecting the gap between these two numbers to continue to close further in the months ahead. If the national inflation trends continue their decline, as expected, to get closer to 2% over the next year or two, we would expect that Seattle would follow on that.

That doesn’t mean that the Seattle indices, at least over time, won’t ride a slight amount above the national numbers. As long as the Seattle regional economy continues to ride as strong as it has over the past several years, the related inflation pressures, especially on housing costs, will continue. The strong economy places demand pressures throughout the economy that simply and directly drives up prices for everything. We have said repeatedly that if you were to tie your contract to a particular index, the Seattle index is a better bet than the All Cities, and we continue to make that recommendation.

In our next newsletter, we’ll discuss our preliminary assessment as to how these inflation developments may impact current and near-term contract negotiations.

Filed Under: CPI, Economics