How Rapidly Rising CPI Impacts Relocation
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How Rapidly Rising CPI Impacts Relocation

How Rapidly Rising CPI Impacts Relocation

Published: Apr 11, 2022

Rising energy, food, rent prices are seen everywhere today.  

The March 2022 all items Consumer Price Index (CPI) inflation rate hit 8.5 percent annually – a new 40-year high with continued surges in costs.

Mobility programs are not immune to inflation. Consider the following impact areas: 

Allowances and Per Diems

The food price index climbed by one percent last month for a total year-over-year increase of 8.8 percent and “food prepared at home” now costs 10 percent more than it did a year ago. Restaurant prices were up sharply year over year as well as “food-away-from-home” inflation rose 6.9 percent year-over-year last month – the largest 12-month increase since December 1981 according to the Bureau of Labor Statistics.

Consideration: Companies are encouraged to review travel per diems and relocation allowances more frequently with these increasing costs impacting relocating families.

Household Goods and Transportation Expenses

There was a whopping 18.3 percent increase in gasoline prices in March compared to February with gasoline prices rising 48 percent year over year. Mover labor costs for drivers and crews are also up this year.

Considerations: Using carefully vetted and proactively managed household goods service partners is critical. As moves are weight based, NEI encourages reducing total weight by using pre-move services like Discard and Donate to help transferees reduce the shipment size and, thus, lower costs. 

Recruiting & Retention

The unemployment rate fell from four percent in January to 3.6 percent in March – basically at pre-pandemic levels. With limited labor supply, the U.S. unemployment rate could fall 0.5 percent further by the fourth quarter – its lowest level since 1953.

Research by the Federal Reserve Bank of St. Louis found workers who have recently left the workforce were dominated by accelerated retirements and the need to stay home to care for someone. Similarly, the Pew Research Center found 48 percent of respondents cited childcare as a reason they quit their job and nearly half point to lack of flexibility to choose working hours.

Considerations: Fewer people are looking for work or filling available jobs, but companies that provide a better work-life balance and well-rounded benefits will be best positioned to attract/retain talent. As the battle for talent escalates companies are evolving rapidly and asking:

  • How far are our company stakeholders willing to go to secure candidates today?
  • Are we comparing our relocation policies against our competitors?
  • How can policies better support recruiting efforts?
  • Do our policies reflect changing trends, demographics, and business drivers? 

“People’s expectations are growing and it’s important to be mindful of that as you look to attract and retain and also develop your workforce,” said principal Mercer consultant Vlad Gogish.

Home Purchase

The average rate on 30-year fixed-rate mortgages surged 145 basis points to nearly five percent during the first quarter of 2022, above what Dr. Lawrence Yun, Chief Economist at the National Association of Realtors, and The Mortgage Bankers Association predicted.

Considerations: Though rates are still historically low, companies might consider temporarily modifying relocation benefits to aid in recruitment efforts. Some options include offering reimbursement of new home closing costs whether the new hire or transferee was a homeowner or renter in the previous location, considering allowances for high cost of living areas or providing mortgage subsidies, if needed.

Not Permanent, Not Transitory

“Transitory” inflation will clearly last longer than was originally anticipated by The Federal Reserve, who is projecting further interest rate hikes in 2022 to help reduce inflation to its two percent per year goal. Economic forces, however, may add even more cost pressure this year.

If you would like to discuss how to support your company recruitment, relocation, and retention goals in this challenging inflation environment, please contact your NEI representative.

 

Sources:

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.nytimes.com/2022/04/13/briefing/inflation-forty-year-high-gas-prices.html

https://www.cnbc.com/2022/04/12/how-much-grocery-prices-increased-as-inflation-reaches-41-year-high.html

https://www.foodservicedirector.com/menu/menu-price-inflation-hit-new-40-year-high-last-month

https://www.nytimes.com/live/2022/04/12/business/cpi-inflation-report#consumer-prices-energy

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