A Very Early Take a look at 2025 Price-Of-Dwelling Changes and Most Contribution Base

by Calculated Danger on 6/13/2024 02:01:00 PM

The BLS reported yesterday:

The Client Value Index for City Wage Earners and Clerical Employees (CPI-W) elevated 3.3 p.c over
the final 12 months to an index degree of 308.163 (1982-84=100). For the month, the index elevated 0.1
p.c previous to seasonal adjustment.

CPI-W is the index that’s used to calculate the Price-Of-Dwelling Changes (COLA). The calculation dates have modified over time (see Price-of-Dwelling Changes), however the present calculation makes use of the typical CPI-W for the three months in Q3 (July, August, September) and compares to the typical for the very best earlier common of Q3 months. Be aware: this isn’t the headline CPI-U and isn’t seasonally adjusted (NSA).

• In 2023, the Q3 common of CPI-W was 301.236.

The 2023 Q3 common was the very best Q3 common, so we solely have to check Q3 this 12 months to final 12 months.

Click on on graph for bigger picture.

This graph reveals CPI-W since January 2000. The crimson strains are the Q3 common of CPI-W for every year.

Be aware: The 12 months labeled is for the calculation, and the adjustment is efficient for December of that 12 months (obtained by beneficiaries in January of the next 12 months).

CPI-W was up 3.3% year-over-year in Could, and though that is very early – we’d like the info for July, August and September – my very early guess is COLA will in all probability be between 2.5% and three.0% this 12 months, the smallest enhance since 1.3% in 2021.

Contribution and Profit Base

The contribution base will likely be adjusted utilizing the Nationwide Common Wage Index. That is primarily based on a one-year lag. The Nationwide Common Wage Index will not be accessible for 2023 but, though we all know wages elevated solidly in 2023. If wages elevated 5% in 2023, then the contribution base subsequent 12 months will enhance to round $177,000 in 2025, from the present $168,600.

Bear in mind – this can be a very early look. What issues is common CPI-W, NSA, for all three months in Q3 (July, August and September).