With inflation on the rise in the U.S., Social Security benefits, which are directly linked to it, are expected to increase more than ever. According to the “Senior Citizens League” (The Senior Citizens League) forecast, based on cost-of-living adjustments, U.S. Social Security benefits are expected to increase by 6.1% next year, the largest increase since 1983, which is linked to the CPI.
In response, Bloomberg reported that the increase means that 65 million Americans, mostly seniors, will receive more money. In addition, with many employers raising pay levels, overlaid with rapid rent growth, these factors will be an important factor in spurring high inflation into 2022 (rather than temporarily).
In an interview, Jefferies Chief Economist Aneta Markowska noted that
One piece of data doesn’t mean a trend is forming, but if there are three data points and you connect them in a line, at some point you will see a trend. Not since the 1980s have we seen inflation of this strength, breadth, and duration.
According to previously released data, both the U.S. CPI and PPI increased more than market expectations in June. The CPI rose 5.4% year-over-year, the largest increase since August 2008, while the core CPI, which excludes food and energy prices, posted a 4.5% increase, not only higher than market expectations of 4.0%, but also the highest increase in 30 years; the PPI rose 7.3% year-over-year, the fastest year-over-year growth rate on record. For comparison, the CPI and PPI grew 5% and 6.6% year-over-year, respectively, in May.
In addition, the S&P Case Shiller National Home Price Index released late last month rose 14.59% year-over-year in April, setting a new record for the highest monthly year-over-year increase, while the 20-city home price index released at the same time rose 14.88% year-over-year in April, also the highest level since November 2005.
In fact, it’s not just seniors who will see increases in their Social Security payments; many other employers will also be adjusting their pay. For example, U.S. government employees are also seeking higher pay increases. The Biden administration previously proposed a 2.7 percent increase in government employee pay, but the American Federation of Government Employees (AFGE), one of the largest federal unions, and the American Finance Employees Union are seeking a 3.2 percent increase.
The continuous high inflation not only made market participants jaw-dropping, but U.S. Treasury Secretary Yellen also believed in an interview on July 16 EST that inflation would rise rapidly in the coming months. She stated at the time that
We’re going to have many more months of rapid inflation (rise). So I wouldn’t say it’s a one-month phenomenon. And I think in the medium term, we’ll see inflation fall back toward normal levels. But of course, we have to keep a close eye on it (inflation).