Over the past year, inflation in the U.S. hit a four decade high, the Labor Department reported last month. In Seattle, the growth was even higher.

The Consumer Price Index, which measures the average change in prices for consumer goods and services over time, increased 7% across the U.S. in 2021 — the largest increase since 1981. In Seattle, prices climbed even faster at 7.6%  — the largest increase since 1998, according to the earliest available data from the department’s Bureau of Labor Statistics.

The Seattle area saw the largest surge in prices since 1991 last year.

Seattle’s CPI over the past year increased more than most other U.S. cities.

The goods and services monitored in the CPI are everyday items, ranging from groceries to appliances, transportation or housing — often referred to as a market basket of goods and services. The items are weighted in a monthly or annual household budget to measure the inflation rate, or how the increase in prices affects the average person.

Certain items, like the price of gasoline, are known to fluctuate day-to-day, while items like postage stamps, may change occasionally by a small margin. When measuring inflation, economists pay particular attention to less volatile items.


In Seattle’s market basket, the cost of less volatile items such as used cars and trucks, household furnishings and appliances, and housing, have risen significantly over the past year. The price of food and beverages increased 8.9%, led by the significant rising cost of meat, poultry and eggs, alcoholic beverages and fruits and vegetables. Like the rest of the country, energy prices here have also jumped largely due to higher prices for gasoline and natural gas service.

This rate of increase in gasoline prices in 2021 is the highest recorded in the Seattle area since 2009.

Among the various weights assigned to dozens of goods and services, shelter or housing weighs the heaviest by far. In December 2020, its relative importance to other weighted goods was over 40%.

Studies show an increase in price for housing services is more likely to affect young people, communities of color and lower-income households, as they are more likely to rent. Similarly, a price increase for used cars and health care has a greater impact on these groups, as it’s more likely they cannot afford new cars, or are uninsured and likely have to pay out of pocket for medical expenses.

Inflation is a case of “too much money chasing too few goods,” said Jacob Vigdor, an economist with the University of Washington Evans School of Public Policy.

The city has always been more expensive than other parts of the country because of, among other things, relatively high shipping costs in the Pacific Northwest.


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“When you think about what’s going on here recently, not only has Seattle been more expensive than other places for a while, the price level is now accelerating faster and ahead of other parts of the country,” Vigdor said.

Wages and salaries have not kept pace with the rising prices. In the Seattle area, the gap between the growth rate over the past year and the increase in salaries and wages over the same time was a 3.8 percentage point difference. In 2019, prior to the onset of the pandemic, this gap stood at 0.9 percentage points.

And while Seattle’s CPI increased at a higher rate than most other cities, wages and salaries did not rise as quickly. Compared to other metros, Seattle recorded a lower increase over the past year.

This accelerated rise in prices here is reflective of a few factors, including the increase in household savings during the pandemic. Economists note while the federal stimulus money has been a contributing factor, it is not the primary factor in rising prices.

The key factor is the shortage in the supply of workers. “Statistically speaking, if you are a job seeker right now, you’re going to find it,” said Anneliese Vance-Sherman, Seattle regional economist with the state Employment Security Department.


Typically in a recession, workers are laid off if there is less demand for their work, causing the unemployment rate to rise. When the demand returns, it usually comes back to an ample supply of labor. But this time, while the demand has returned, the supply has not.

“The [labor] supply is still constrained by the uncertainty that’s present with the COVID-19 pandemic,” Vance-Sherman said.

She pointed to the reduction in the number of women in labor force during the pandemic as one factor in the shortage.

“A lot of women-dominated professions were impacted early on, and a lot of women in particular stayed home to care for children with increased child care constraints like online schooling,” she said. “A lot of those constraints are still in place.”

The high cost of housing in Seattle also has an impact on the labor force, because some companies can’t find workers who can afford to live in Seattle at the wages they offer, Vigdor said. To find workers, he said, employers have to pay premium wages — some portion of which is often passed on to consumers.

He added that the accelerated growth in prices could be a one-time disruption to the economy caused by the pandemic, and as life returns to normal so should prices.