Nearly 8% Inflation Is Highest In 40 Years: What It Means In NJ

NEW JERSEY — Surging prices for food, gas and housing that are already putting the squeeze on New Jersey residents could go even higher, according to a report Thursday from the Labor Department that showed inflation jumped 7.9 percent over the 12-month period ending in February, the sharpest spike since 1982.

That means New Jersey residents paid about 12 percent more for meat, poultry and eggs, 5.4 percent more for milk, 9 percent more for cereal and bakery products, and 6.1 percent more for fruits and vegetables. It cost 4.2 percent more to put clothes on their backs, 20.3 percent more for gas and 6.1 percent more for electricity.

But that’s not the worst of it.

Overall, energy costs increased more than 25 percent over the 12-month period. The biggest increases were in motor fuels (38 percent). Natural gas costs increased almost 24 percent.

The government report doesn’t reflect increases in already-high gas prices associated with President Joe Biden’s announcement Tuesday of a ban on Russian crude and other energy imports as punishment for its unprovoked invasion of Ukraine.

The average gas price stood at $4.32 a gallon Thursday, a jump of 6 cents over the day prior, according to AAA. The per-gallon cost of gas has increased 62 cents since Russia invaded Ukraine on Feb. 24, sparking fears worldwide of increasing energy costs.

The average price for a gallon of regular gas in New Jersey is higher than the national average with a price of $4.37 as of Thursday, according to AAA.

• Read More: NJ Gas Tax Holiday: Legislators Call For Aid As Pump Prices Soar

Congresswoman Mikie Sherill of District 11 recently spoke on NJ Spotlight calling for a gas tax holiday to lower prices at the pump.

"Suspending the gas tax will give New Jersey families immediate and direct relief," said Sherrill in a tweet.

Congressman Donald Norcross of District 1 also said he is supporting a gas tax.

"We need to help working families with high gas prices now, just like they did through the pandemic," said Norcoss. "That's why I support a gas tax holiday to save New Jerseyans +60 cents/gallon, and continuing to support highway & transportation trusts through federal aid."

Hoping to offer some relief to New Jersey residents Senator Ed Durr will introduce a new bill, the "Gas Price and Inflation Tax Credit Act," that would give a $500 refundable income tax credit to families with an income less than $250,000 when they file their 2021 tax returns.

"Gas prices and inflation are both soaring, which is making it harder for New Jerseyans to fill their tanks and feed their families," said Durr (R-3). "At the same time, Governor Murphy is sitting on billions of dollars of extra taxes he collected this year that he doesn’t need. We should Give It Back, every penny of it, to help New Jersey taxpayers who are struggling with the rising price of gas and the highest inflation in 40 years."

The new proposal is expected to provide about $1.5 billion in gas tax and inflation relief to New Jersey families.

The report from the Labor Department is a cautionary tale about future increases, showing a steady increase in inflation since late fall. Inflation rose 0.8 percent from January to February, up from 0.6 percent from December to January and 0.6 percent from November to December.

The cost of food increased on pace with inflation, costing Americans 7.9 percent more last month than in February 2021. Importantly, costs increased 1 percent from January to February 2022; 0.9 percent from December to January; and 0.5 percent from November to December.

The almost 8 percent inflation rate was driven not only by increases in almost everything Americans spend money on but also by 4.5 percent pay raises, which are higher than at any point in 20 years, and persistent shortages of goods and services, The Associated Press reported.

But even with those solid pay raises, many Americans aren’t able to keep pace with the increasing costs of necessities, which could put Democrats — who control both houses of Congress and the White House — in a vulnerable position in midterm elections.

Inflation could reach 9 percent this month or next, Eric Winograd, a senior economist at asset manager AllianceBernstein, told the AP.

Some of that will likely be driven by Russia’s war in Ukraine. Since Feb. 24, prices have soared for commodities for which the two countries lead the world in exporting, including wheat, corn, cooking oils and metals such as aluminum and nickel.

The cost of rent has also surged at the fastest rate in decades, largely due to steady job growth and surging real estate prices that have combined to put apartment vacancy rates at their lowest level since 1984, according to The AP analysis.

To beat back inflation, the Federal Reserve plans to raise interest rates several times in 2022, beginning with a quarter-point hike next week. It’s a delicate challenge for the Fed, which risks undercutting the economy and possibly triggering a recession if it tightens credit too aggressively, The AP reported.

Energy cost increases are a particularly difficult challenge for the Fed

Soaring energy costs pose a particularly difficult challenge for the Fed. Higher gas prices tend to both accelerate inflation and weaken economic growth. That’s because the more Americans spend at the gas pump, the less they’ll spend on other goods and services, creating a dynamic economists call “stagflation” — a combination of high inflation and a sputtering economy.

However, The AP reported that most economists think the U.S. economy is growing strongly enough that another recession is unlikely, even with higher inflation.

— The Associated Press contributed reporting.