Hang out long enough in the city with the highest inflation in the US, and you’ll quickly understand why the Federal Reserve faces a Herculean task taming prices.
Midland, Texas, is strung between El Paso and Dallas along Interstate 20, and more than four hours’ drive from either big city. Its far-flung location makes everything costlier and harder to get, including workers and vehicles, which you need to go anywhere in the spread-out region with limited public transportation. Add to that the local economy’s reliance on oil, and you get the unenviable No. 1 spot for inflation over the past year.
Menus at local restaurants have sticky notes telling diners that prices have been raised. A gallon of milk has surged to about $6 at local gas stations, often the closest option for basics. And each Wednesday, a growing line of hundreds of cars forms outside the area’s largest food bank.
Inflation in Midland has hovered near 10% for the past six months, more than any of the about 400 metropolitan areas tracked by Moody's Analytics — and well above the national average. Over the period, the West Texas oil-industry hub has had it even worse than big-city hotspots such as Atlanta and Phoenix.
US consumer prices rose an annual 8.3% in April, according to government data released Wednesday, a deceleration from 8.5% in March, which economists say was probably the peak. But more economic pain is on the way in remote towns in southern and midwestern states that have seen labor pools shrink during the Covid-19 pandemic.
As the Fed embarks on an interest-rate hiking cycle to tamp down on decades-high inflation, Midland's struggles show how difficult it’ll be to douse prices with the blunt tool of monetary policy. The central bank raised interest rates by half a percentage point last week, the most since 2000, and signaled it would keep that pace in the next couple of months.
Low borrowing costs helped fuel the latest surge in prices, but raising them now won't necessarily help in places like Midland. Many of the factors pushing up costs here will take months, if not years, to untangle. And key drivers of inflation are out of policymakers’ hands: the war in Ukraine, logistics issues and lockdowns in China that have ripple effects on global supply chains.
They’re also out of the hands of local politicians in the heavily Republican-voting area. If anything, inflation has only deepened sentiment against President Joe Biden. Texas Governor Greg Abbott — up for reelection in November — decries Biden for high prices, while Democrats say Abbott’s own crackdown at the border has delayed goods and pushed up costs.
On the ground, the implications are very real for Bo Garrison, owner of Permian Dirt Works LLC. He and his 20 workers use about two dozen trucks, excavators and bulldozers to dig, flatten and haul several tons of caliche rock and earth each day, creating roads and level extraction sites called “pads” for energy companies.
A few weeks ago over enchiladas at a Mexican restaurant in town, a Caterpillar Inc. salesperson gave Garrison some bad news: There were no more bulldozers available. Shortly after that, his primary car dealer told him something previously unthinkable: There were no new Ford F-250s available in Midland until at least 2023.
Garrison’s company will have to pay more for repairs and rentals and try to pass on the cost — and in some cases may have to pass on some contracts. Other expenses are piling up, including wages, which he raised up to 20% in the past year, and $650 a day for employees’ fuel — nearly double the amount just a few months ago.
“Now I gotta cross my fingers and pray that my mechanics are taking care of the equipment because if they break, that’s it,” Garrison, 43, said shortly after dawn on a recent Friday, standing in the dirt and sand of a pad that used to be a cotton field. It’s one of the hundreds his company created over the past decade in the region, which Garrison travels some 200 miles daily.