January pay raise on target; retiree COLA on life support

For federal workers and retirees, the “news” from the financial front is repetitive and not so good.

While feds are inline for their biggest raise in years in 2017, the proposed 1.6 percent raise isn’t much according to many workers who have seen their health premiums get more costly each year. This year, workers got a 1 percent across-the-board raise, plus a slight locality adjustment in a dozen cities. That followed a 1 percent raise in 2014, which was preceded by three years (2011, 2012 and 2013) with no January raise. Some members of Congress have proposed a higher amount (5.3 percent) but that’s the longest of long shots.

Retirees are in a different position. Their January adjustments (if any) are linked to increases in the cost of living. Because of low inflation (primarily because of cheap oil) retirees didn’t get a COLA this year. In 2015, the COLA was 1.7 percent and in 2014 it was 1.5 percent.

COLAs are normally based in the rise in living costs (as measured by the Consumer Price Index-W) from the third quarter of the current year over the third quarter of the previous. I say normally because this year is different. There was a COLA this January based on 2015 inflation. That means that if there is any retiree increase in 2017 it will be based on any increase in living costs over the third quarter (July, August and September) for the year 2014. I told you this stuff was complicated!

Many retirees complain that the government is using the wrong yardstick to measure inflation for military retirees, federal retirees and people who get Social Security. The market-basket of goods the Labor Department uses to track inflation doesn’t take into account the higher medical costs of older people, according to many retirees.

So what’s the outlook for a 2017 COLA? We asked a long-time CPI watcher who said “oil prices are expected to remain below $50 a barrel for the year on beliefs there is a glut, and the Federal Reserve Board at their recent meeting did not raise interest rates, mainly because of a lousy U.S. jobs report. But in the past they have indicated they would like to see inflation rise more before voting to raise the prime interest. The Fed stated it now expects a 1.4 percent inflation this year. None of this news supports much of a rise in the CPI but there is still some time left.”

The Bureau of Labor Statistics yesterday reported an uptick (0.43 percent) in the month of May. That’s the biggest jump in the cost of living in some time and it makes a January raise more possible. So while the COLA is headed in the right direction (up) , the final numbers (for July, August and September) won’t be available until mid-October

Nearly Useless Factoid

By Michael O’Connell

Time Magazine ranked the children’s game Barrel of Monkeys #53 on its 2011 list of All-Time 100 Greatest Toys.

Source: Time

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