DALLAS — Read this story and more North Texas business news from our partners at the Dallas Business Journal.
U.S. inflation cooled further in June.
That was welcome news for North Texas consumers and businesses, as it raises the possibility of Federal Reserve rate cuts later this year.
Last month, the consumer price index was up 3% from a year prior, according to U.S. Bureau of Labor Statistics data released July 11. That was down from the 3.3% year-over-year increase seen in May and 3.6% in April.
With a 3% CPI increase, inflation is its lowest level since June 2023.
Last month, "core CPI" that excludes volatile food and energy prices increased 0.1% from May, the smallest increase since January 2021, the Wall Street Journal reported.
These rates have not been seasonally adjusted, which is when the data is altered to remove the influences of predictable seasonal patterns, according to BLS.
Investors don’t expect Fed governors to lower rates at their next meeting July 31, according to the Wall Street Journal. Instead, investors are betting the Fed might lower rates two or three times in meetings in the fall and winter.
With inflation finally back at 3%, and the possibility of rate cuts ahead, how has the era of higher prices impacted businesses in North Texas?
Just like households, businesses have seen costs increase for staples like food and fuel. Financing has also become significantly more expensive and many companies have delayed new projects because of the cost of debt.
For lots of businesses, inflation has also meant higher compensation. In March, average total compensation in the DFW combined statistical area — which extends north into part of Oklahoma — was $44.61 per hour in the private sector, according to the latest BLS data. That was up 3.5% from a year prior. In March 2023, the year-over-year increase was 5.2%.
Inflation is one of three primary drivers of rising compensation, along with the job market and productivity, said Bill Adams, chief economist at Comerica Bank.
In 2022 and 2023, compensation surged. Workers "had very strong bargaining power in the last couple of years in a tight labor market," Adams said. Many employees asked for, and received, larger-than-normal raises because inflation was eroding their purchasing power.
"Now, the labor market is operating on a more even keel, and the inflationary pressures from employment costs are more manageable than they’ve been in the last few years," Adams said.
The job market remains a bit skewed toward labor in DFW, with more open positions than job seekers, which can make recruiting more difficult. Productivity is looking strong and Adams noted new technologies should factor into this facet of compensation. He cited things like self-checkout stands at stores and automated equipment in factories.
Increased productivity can help businesses pay more without raising the price for consumers, he noted.
