Author: Jeremy Horpedahl

Is the Great Grocery Inflation Over?

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The average price of a dozen eggs is back up over $4, about the same as it was 2 years ago during the last avian flu outbreak. Egg prices are up 65% in the past year. But does that mean the grocery inflation we experienced in 2021-22 is roaring back?

No really. Spending on eggs is around 0.1% of all consumer spending, and just about 2% of consumer spending on groceries. Symbolically, it may be important, since consumers pick up a dozen eggs on most shopping trips. But to know what’s going on with groceries overall, we have to look at the other 98% of grocery spending.

It’s been a wild 4 years for grocery prices in the US. In the first two years of the Biden administration, grocery prices soared over 19%. But in the second two years, they are up just 3% — pretty close to the decade average before the pandemic (even including a few years with grocery deflation!).

As any consumer will tell you, just because the rate of inflation has fallen doesn’t mean prices on average have fallen. Prices are almost universally higher than 4 years ago, but you can find plenty of grocery items that are cheaper (in nominal terms!) than 1 or 2 years ago: spaghetti, white bread, cookies, pork chops, chicken legs, milk, cheddar cheese, bananas, and strawberries, just to name a few (using BLS average price data).

There is no way to know the future trajectory of grocery prices, and we have certainly seen recent periods with large spikes in prices: in addition to 2021-22, the US had high grocery inflation in 2007-2009, 1988-1990, and almost all of the period from 1972-1982 (two-year grocery inflation was 37% in 1973-74!). Undoubtedly grocery prices will rise again. But the welcome long-run trend is that wages, on average, have increased much faster than grocery prices:

Housing Quality Has Improved Dramatically Since the 1980s — For the Poorest Households

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A few weeks ago I wrote a post comparing housing costs in 1971 to today. I noted that while houses had gotten bigger, the major quality improvement for the median new home was the presence of air conditioning: a semi-luxury in 1971 (about 1/3 of new homes), to a standard feature in 2023. Even accounting for the presence of central air-conditioning and more square footage, I concluded that housing was about 17 percent more expensive in 2023 than 1971 (relative to wages).

However, if we consider the housing quality of the poorest Americans, the improvements go beyond air-conditioning and more square feet. A recent paper in the Journal of Public Economics titled “A Rising Tide Lifts All Homes? Housing Consumption Trends for Low-Income Households Since the 1980s” has important details on these improvements (ungated WP version). In addition to larger homes, there was “a marked improvement in housing quality, such as fewer sagging roofs, broken appliances, rodents, and peeling paint. The housing quality for low-income households improved across all 35 indicators we can measure.”

Overall, the number of poor American households living in “poor quality” housing was roughly cut in half from 1985 to 2021, from 39% to 16% among social safety net recipients, or from 30% to 12% for the bottom quintile. The 12-16% of poor households that still have poor quality housing is much more than we would like, but these are dramatic improvements over a period when many claim there was stagnation in the standard of living for poor Americans.

This figure from the paper shows the improvements for the different features:

For example, the number of households with no hot water was just 20% of what it was in the late 1980s. Some of the other major improvements are also related to plumbing and water, such as the number having no kitchen sink or no private bathtub/shower, but there was also a big decline in the presence of rodents in the house. All of the 35 indicators they looked at showed improvements, on average a 50% reduction in the number of households with these poor-quality components. This paper only uses data back to 1985, but almost certainly there would be even larger improvements if we used 1971 as the starting point.

While the median new home in 1971 had complete indoor plumbing, this was clearly not true for many poor households even through the 1980s. When we talk about the increasing cost of housing for the poorest Americans, much of that improvement does represent essential quality improvements — and not merely more square feet and air conditioning (though they did get these improvements too).

Homicides in 2024 Were Down Significantly

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The tragic act of terrorism in New Orleans early on New Year’s Day might seem like confirmation to many that crime, especially in big cities, is still at elevated levels from before the pandemic. But we have to be very careful with anecdotes, no matter how deadly and visible.

Using data from the New Orleans Police Department dashboard, which has been updated through December 31, 2024, we see that 2024 had the lowest number of homicides going back to 2011, which likely makes it one of the safest years on record in New Orleans:

New Orleans is not alone.

Using data from the Real Time Crime Index, we see that among the 10 largest cities in the US in their index, through the first 10 months of the 2024 (the most recent available for all these cities), homicides are down 16.9% compared to 2023.

Murders in these 10 largest cities are still about 5.6% above the first 10 months of 2019, but three of the 10 cities (Dallas, Philadelphia, and San Diego) are already below the first 10 months of 2019, by fairly significant margins (-13.7%, -26.2%, and -21.6%). Once we have all 12 months of data for these cities, I suspect that a few more will be back to 2019 levels.

Crime is indeed still a major social problem in much of the US, but we are getting back to 2019 levels of social problems — which is still bad, but violent crime is not high and rising, as many seem to believe based on very notable and horrific events.

(The 10 largest cities in the RT Crime Index are Chicago, Dallas, Houston, Las Vegas, Los Angeles, New York, Philadelphia, Phoenix, San Antonio, and San Diego.)

Nintendo vs Nintendo: Time Prices of Video Games in 1986 and 2024

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For decades one of the most popular Christmas gifts for kids (and often adults) has been video game systems. And Nintendo has long been a dominant player in this market: the original NES arguably launched the modern gaming market in 1986 (even though it wasn’t the first, it was the first blockbuster) and Nintendo’s latest offering, the Switch, is now the best-selling console ever in the US.

As we often ask on this blog: has it become more or less affordable for an average worker to buy this iconic Christmas gift (or even buy one for yourself)?

When it comes to the consoles themselves, the Switch and NES are, perhaps surprisingly, equally affordable. The original NES cost $90 in 1986, while the Switch costs $300 today. Average wages in late 1986 were $9/hour and they are about $30/hour today. So in both years, it took about 10 hours of work to buy the console (alternatively, it’s about 25% of median weekly earnings in both years).

But as any serious gamer will tell you, the individual game cartridges can cost as much or more than the console if you want to play a lot of games. For example, the games available in the 1986 Sears catalog ranged from $25-$30. To buy just the 10 games in that catalog would cost $275 — over 30 hours of labor at the average wage, or about 3 hours of labor per game.

Today there is a wider range of prices for games, but the most expensive Switch games are around $60, or just 2 hours of labor at the average wage. There are also plenty of games around $30, or just 1 hour of labor.

The challenge with the comparison is that video games today are much higher quality, challenging, and advanced in so many ways. Is there any way to make a more direct comparison?

Yes. Nintendo offers an annual subscription for $20 to Nintendo Switch Online. Included in the subscription is access to nearly every NES game, plus Super Nintendo and Gameboy games. Not only do you get the 10 games from the 1986 Sears catalog, but many dozens more. All for less than $1 hour of labor at the average wage.

In other words, for 30 hours of labor today (the time to purchase those 10 original NES games), you could buy about 46 years worth of subscriptions to Nintendo online. That’s almost a lifetime of video game play, with many more advanced games.

Economic Nostalgia: 1890s Edition

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You see a lot of nostalgia for the recent past. People pining for the simpler life of the 1950s, or claims that wages have stagnated since the late 1970s or early 1980s. I’ve tried to take these arguments seriously and respond to them, such as in a paper I wrote with Scott Winship and summarized in a blog post last June. But occasionally, you find really weird economic nostalgia, like for the 1890s. Yes, the 1890s, not the 1990s.

Here’s one example: a cartoon shared on social media of workers being oppressed in the 1890s, with the caption “the problem has only gotten worse.” That post received 2 million views on Twitter, possibly because many people are criticizing it, but it also has a lot of retweets and likes.

If it was just one semi-viral social media post from an anonymous Twitter account, we could easily dismiss it. But 1890s economic nostalgia has been coming from another important place lately: President Elect Trump. Of course he is nostalgic for the policies of the 1890s. But on occasion, Trump will say things like “Go back and look at the 1890’s, 1880’s with McKinley and you take a look at tariffs, that was when we were at our richest” (emphasis added).

Really, our richest in the 1890s? Can this be true? Are the anonymous socialist Twitter accounts correct? Let’s look at the data. But the answer probably won’t surprise you: your intuition is correct, we are much better off today than the 1890s, in almost every way of looking at it economically.

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House Prices and Quality: 1971 vs 2023

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Last week I did a comparison of “time prices” for several goods and services in 1971 compared with 2024. For almost all goods and services, it took fewer hours of work in 2023 to purchase them. In some cases, huge increases in affordability; air travel is 79% cheaper and milk is 59% cheaper, in terms of how much time an average worker needs to labor to pay for them.

There was one major exception though: housing. Especially the cost of buying a new home. Just using the median sale price of a home, the cost (in terms of hours of work) roughly doubled between 1971 and 2024. That’s not good!

Many who commented on the post mentioned that houses are much bigger today, and I noted that in the post but still claimed this is a worrying trend: “since 1971 you can’t really argue the quality improvements make up for the increase. Yes, houses are much bigger (about double in size), but that’s not clearly driven by consumer demand (more so by zoning and other laws). The 1971 house also had indoor plumbing (but maybe not air conditioning).”

Furthermore, housing is the largest expense for most families, both today and in 1971. In the early 1970s it was 30.8% of consumer spending, and in 2023 it was slightly higher at 32.9%. Given all this, it is worth investigating further.

First, let’s consider the size of a typical house. For most of the 1971 data, I will use this HUD report on new single-family homes. And I will use the similar Characteristics of New Housing report for 2023 (the latest year available) to compare.

Are houses bigger today? Yes, but not nearly enough to account for the decreasing affordability I showed in the previous post. In 1971, the median new home had 1,400 square feet of floor space. In 2023, it was 2,286. That’s a big increase (over 60%), but let’s now do the time-price affordability calculation, which I show in the table below.

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“Time Prices” Today Compared With 1924 and 1971

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I’ve written before on this blog about “time prices”: the amount of time it takes at a particular wage to buy a specific product. Time prices are especially useful for making historical comparisons of the real price of a good or service. Rather than adjusting historical prices for inflation (which only tells you whether they have increased faster or slower than average prices), time prices give you a real comparison of whether a good has become more or less affordable.

Antony Davies recently did a 100-year comparison of time prices for an average worker in the US. He compared prices in 1924 for several common food items, gasoline, electricity, movie tickets, airline tickets, an automobile, and several measures of housing costs to the best comparable thing in 2024. This following table shows his results:

You will notice a few things here. For the median worker, most things are much more affordable in 2024. Some things are dramatically so! For many items, the median worker in 2024 is similar to someone in the top 1% in 2024. Huge improvements in the standard living.

It will probably not surprise you that one major exception is housing. For renters, things are not obviously worse, but they are not better, depending on what size of city you are in (renters also have lower incomes, but that would be true in both time periods). However compared to the average home price, things look much worse in 2024. You can reasonably reply that the home is much larger and better quality in 2024 (as late as 1940, barely half of homes had complete indoor plumbing!), and this is all true. Still, an average house today is much better, but also much less affordable.

Despite the high cost of housing, the average worker today is much better off than 1924. It’s hard to deny it.

But what about more recent times? As a recurring meme likes to date it, what about since 1971?

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Don’t Let Nominal Prices Fool You (Thanksgiving Edition)

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When you see prices from the past, especially the distant past, your normal reaction is perhaps one of envy or nostalgia. Take for example the Thanksgiving menu from the Plaza Hotel in New York in 1899. As you browse the menu, note that the prices are in cents, not dollars.

The most expensive items on the menu are only a few dollars, while many items can be had for around 50 cents. But hopefully your nostalgia will soon fade when you recall that wages were probably lower back then.

But how much lower?

According to data from MeasuringWorth.com (an excellent resource affiliated with the Economic History Association), the average wage for production workers in manufacturing was 13 cents per hour in 1899. From this we can immediately see that a dish such as Ribs of Prime Beef (60 cents) would take about 4.5 hours of work for a production worker to purchase.

How can we compare these prices and wages from 1899 to today?

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Thanksgiving Meal Continues to Get Cheaper

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Farm Bureau has released their annual data on the cost of a Thanksgiving meal. The headline is that this meal has declined, in nominal terms, for 2 years in a row — back-to-back years of roughly a 5 percent decline. That’s good news for consumers. But they note it’s not all good news, because the meal is still 19 percent higher than 2019, “which highlights the impact inflation has had on food prices – and farmers’ costs – since the pandemic.”

However, the news is even better than they say. If we compare the price of this meal to median earnings, it is actually cheaper than it was in 2019. It’s now the second most affordable Thanksgiving on record, and the only lower year was 2020 — an anomalous year for many reasons (prices fell, due to decreased demand, while median wages were artificially lifted by lower-wage workers losing their jobs).

As a percent of median weekly earnings for full-time workers, the Farm Bureau Thanksgiving meal will cost just 5 percent of weekly earnings (note: I use 3rd quarter earnings for each year, since it is the latest available for 2024). In 2020 it was only 4.7 percent, but other than that 2024 is lower than all other years for which we have data, which goes back to the mid-1980s, when it took 6-8 percent of earnings to buy this meal.

Last year I also said that this meal was the second cheapest ever — if you ignore the weird years of the pandemic. But now if you ignore those years, it is the most affordable it has ever been.

That’s something to be thankful for next week, but also every time you go to the grocery store. Since October 2019, average wages have increased more than prices at the grocery store — not by much, but still better than you might suspect (and yes, I have checked my receipts). If we go back to the 1980s, wages beat inflation by a much larger margin.

Did Inflation Make the Median Voter Poorer?

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A new essay by J. Zachary Mazlish answers the title question in the affirmative: yes, inflation made the median voter poorer. The post is data-heavy, with lots of charts and different ways of slicing the data, which is great! But since I am called out by name (or rather, my evil twin, Jeremy Horpendahl), I want to respond specifically to the claim about my data, but also I’ll make a few broader points.

Here’s the Tweet of mine that he links to:

https://twitter.com/jmhorp/status/1854548669317455894

Regular readers will recognize the chart in that Tweet comes from an EWED post from April 2024. Mazlich says that my chart and others like it are “misleading for understanding the election because a) they compare wages now versus January 2020, rather than January 2021.”

Fair enough, but if you read my Tweet you will see that I am specifically responding to an NPR story which said, “if you look at the difference between what… groceries cost in 2019 and what it costs today, and what wages looked like in 2019 and today, the gap is really gigantic.” So, they are specifically using 2019 as a baseline in that story, and my chart specifically used that as the baseline too! That’s why I thought that chart was relevant.

It’s true, of course, that if you want to understand median voter sentiment about the Biden administration, you should probably start the data at the beginning of the Biden administration. But I was responding to the more general claim people make, that they are worse off than in 2019.

With that clarification out of the way, what does Mazlich’s broader post say?

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