The annual pay increase for over 70 million U.S retirees and government benefits recipients may be delayed due to a potential federal government shutdown. The U.S. Labor Department has stated that if a shutdown continues for an extended period, the gathering and publishing activities of economic data conducted by the Bureau of Labor Statistics (BLS) will cease. This shutdown may affect the scheduled release of the Consumer Price Index (CPI) for September, which could lead to a delay in announcing the annual cost of living adjustment (COLA) for Social Security Administration’s monthly benefits.
While a delay in the COLA announcement is likely, it would not impact when the new payment amounts take effect. Social Security retirement benefits recipients will start receiving the new rate in January 2024, while payments to Supplemental Security Income (SSI) beneficiaries usually change in December. The COLA is determined by the annual change in the CPI for Urban Wage Earners and Clerical Workers, published each October by the BLS. A shutdown’s impact on delaying the release of the CPI may consequently affect the COLA announcement by the Social Security Administration.
Last year saw the largest COLA increase since 1981, with an 8.7% rise due to high inflation. However, inflation rates have significantly slowed down this year, potentially resulting in a larger-than-average COLA increase for 2024. Although inflation has decreased from its peak in 2022, it remains higher than the rate preceding the pandemic. Recipients have experienced substantial real income increases compared to inflation this year. In August, the CPI-W increased by 3.4% YoY, mainly due to higher gasoline prices. Nevertheless, the COLA for 2024 is unlikely to provide the same buffer against inflation as seen in 2023.