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“Supercore” Inflation: The Latest Buzzword to Remind You Everything Is Fine

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There is apparently a new economic buzzword out there – supercore inflation.

CNN says this is a buzzword we all need to pay attention to.

Why?

According to the pundits, supercore inflation gives us an even better gauge of the reality of inflation in the economy.

In other words, it understates the impacts of inflation even more than core CPI and is a great way to gaslight everybody into thinking everything is fine.

Central bankers and government officials are always looking for ways to tell you things are a lot better than they are. They tinker with formulas (i.e. changing the CPI calculations in the 1990s to make CPI lower). They manipulate data with “seasonal adjustments.” And they create new data points such as “supercore inflation.”

So, what exactly is supercore? As CNN explains it, “Supercore inflation refers to prices that rise when workers get paid more for their services. Think haircuts, electrical work and gardening.”

In a nutshell, supercore measures wage inflation in the services sector.

Jerome Powell alluded to this in a November speech, although he didn’t use the “supercore” buzzword. He called it “core services other than housing.”

This spending category covers a wide range of services from health care and education to haircuts and hospitality. This is the largest of our three categories, constituting more than half of the core PCE index. Thus, this may be the most important category for understanding the future evolution of core inflation. Because wages make up the largest cost in delivering these services, the labor market holds the key to understanding inflation in this category.”

In practice, supercore starts with core inflation, which strips out food and energy costs, and then strips out housing, commodity prices, and other non-service prices. According to CNN, prices in the supercore inflation calculation are “less volatile” than those in the CPI or core CPI calculations.

Of course, the reason we have core inflation is because food and energy prices are “more volatile” than other prices, so they need to be stripped out.

Call me cynical, but it seems like they are just looking for a way to tell you that inflation isn’t that bad and you should be happy. Maybe they should just strip out all of the prices and tell us there is no inflation at all. I mean, they could literally create a formula for that.

This new focus on supercore inflation seems to stem from the misguided notion that rising wages “feed” inflation.

A reporter asked Jerome Powell if there was any evidence of a “wage-price spiral” during the post-FOMC meeting press conference. As Peter Schiff pointed out in a podcast, there can’t be any evidence of such a thing because it doesn’t exist.

The whole concept of a wage-price spiral was dreamed up by a bunch of Keynsian economists during the 1970s that were looking for a scapegoat to blame inflation on.”

Prices don’t go up because wages go up.

Wages are, in fact, prices. They’re just the price of labor. And prices don’t go up because prices go up. Wages go up and other prices go up because the government creates inflation. But Powell wants people to think that inflation is created by the private sector, that the Fed is just some innocent bystander — and the government.”

Biden administration economists recently trotted out supercore to suggest that inflation might not be as bad as the Fed is saying. According to this new formula (something they totally made up for this purpose), this thing called the “supercore wage reading” has fallen from 8% to just over 5%.

Meanwhile, a Moody’s economist told CNN for three months through December, supercore inflation annualized was only up 2.4% and only up 0.9% if you annualized December’s data.

“Supercore inflation was a strong 6.4% on a year-over-year basis through December 2022, but it is moderating,” he said.

Don’t you feel better now?

One of the reasons the powers that be like this supercore number is that it strips out housing costs, which have remained stubbornly high. And the more stuff you can strip out of the calculations, the better the numbers look.

The problem with this is no matter what government number-crunchers strip out of their calculation, you can’t strip those prices out of your monthly budget. It’s not like you can just stop paying for food, energy, housing, or anything else.

Supercore inflation may or may not serve some academic purpose, but it has very little impact on your life. It’s just another gaslighting technique to make you think the government has everything under control.

It doesn’t.

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About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
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