The inflation you don’t see

YouTubeTV just raised the cost of its basic service by $10 per month—a 14% price hike. If you’re on top of your email, you might have seen the notification. But you won’t see any mention of the price hike where you actually consume the product, on your television or other streaming gizmo.

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Consumers have grappled with unusually high inflation for the last three years, an economic burden that may have cost incumbent Vice President Kamala Harris the 2024 presidential election. Harris and her boss, President Joe Biden, have repeatedly pointed to steady progress in bringing inflation down since it peaked at 9% in 2022. But inflation has morphed into a different creature than it was in 2022, and it’s proving difficult to slay.

The overall inflation rate dropped from 9% in June 2022 to 2.4% this past September. That’s almost normal. But it has since ticked back up, to 2.7%, prompting concerns about “reflation.” And it’s not the usual suspects — groceries, gasoline, cars, appliances — that are now driving inflation back up. Instead, it’s services, such as entertainment, insurance, childcare, and haircuts, that are now rising in price by more than incomes.

Read more: Grocery prices pack some punch as overall inflation holds steady

Services inflation is harder to spot than increases in the cost of items on store shelves, where the price is listed on or near the product. Unlike staples, some services, such as medical care or auto repair, are infrequent expenses where the price isn’t clearly marked in the first place. Insurance is typically repriced only once or twice per year, and consumers don’t always remember what they paid last time.

But families spend nearly twice as much on services as they do on goods, so this inflation definitely bites. Housing is largely a service, and that’s most families’ biggest expense. Care for children and elderly family members is another costly service for some families. Just about everybody knows the sting of medical expenses, especially those not covered by insurance.

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For all the focus on food and gasoline prices, services inflation actually surpassed goods inflation all the way back at the end of 2022. Services inflation is now 4.5%, while the overall cost of goods is slightly declining. The whole inflation problem now resides with services.

Rent inflation is the biggest burden in the services category, since it eats up so much of the typical paycheck. Year-over-year rent hikes peaked at 8.8% in early 2023. Rent has since moderated to an annual inflation rate of 4.4%. But that’s still rising by more than incomes, which are growing at just 4%. Rent hikes hurt lower-income people more, since better-off Americans tend to own their homes — and most were able to lower their housing costs by refinancing their mortgages when interest rates hit record lows in 2020 and 2021.

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