The latest inflation statistics say prices have risen by only 1 percent over the past year. But there’s something wrong with those numbers because the pandemic has made economic life more expensive in ways the official bean counters aren’t capturing.
This distortion has led other economic statistics to paint an artificially rosy picture of our current situation. The problem is that measures like real output, real wages and poverty are calculated using inflation adjustments that don’t reflect the higher cost of living during a pandemic. This might help explain why measured poverty has fallen even as lines at food banks have grown.
The government’s approach to measuring inflation is straightforward enough. The Bureau of Labor Statistics tracks the price of a basket of goods and services that is intended to represent average American patterns. The inflation rate is the monthly percentage change in that price.