The economy might feel worse for you than inflation data shows because childcare isn’t ‘necessity’

Inflation isn’t in a great place right now: Despite “affordability” becoming the buzzword of D.C., prices are moving in the opposite direction to consumers’ wishes. The latest CPI report from the Bureau of Labor Statistics shows inflation jumped once again, up to 3.3% over the past 12 months.

A tentative optimist might suggest things are looking up, with the White House suggesting an end to the conflict is imminent. But that does little to address the reality for those paying higher prices at the pump, many of whom had hoped Trump’s return to office would see the power of their day-to-day spending improve at best, and plateau at worst.

Yet even inflation of 3.3% belies the strain some households are under. Families paying for childcare, for example, may find their situation feels significantly worse than economic data describes.

“The economy is constantly shifting and no single household, no single consumer, is experiencing things exactly the same way,” Taylor Bowley, an economist at the Bank of America Institute, told Fortune in an exclusive interview. “When people look at GDP for instance, those prints look pretty good, but then when we really dive deep into some of this by income, we’ve also seen childcare has been a topic that has been particularly prevalent for so many households, because from an economist’s term, childcare isn’t necessarily a necessity, but for so many families it totally is. That is not a discretionary item.”

The gap shows up clearly in how the CPI is constructed. The Bureau of Labor Statistics assigns each category a “relative importance” weight based on average household spending.

As of December 2025, the combined category of tuition, school fees, and childcare accounts for just 2.5 of the index. But most of that reflects college tuition (1.35), while daycare and preschool make up just under 0.7.

That puts childcare on par, in CPI terms, with categories like water and sewer services, shopping club memberships, or tools and hardware—an unlikely reflection of how central it is for many families.

This isn’t an error; it’s a feature of the system. The CPI is designed to reflect average spending across all households, including those without children. But for families who do pay for childcare, those costs can take up a far larger share of their budget—meaning price increases will hit them much harder than the headline inflation data suggests.

“We’ve seen that childcare in our data has continued to rise,” Bowley adds. “The cost of childcare obviously impacts labor force decisions, and that in turn impacts labor growth as a whole.”

Consumers are well aware of this fact: In 2024, Pew Research asked nearly 9,000 people why they had chosen to, or did not, have children. The most popular reasoning was that either these people didn’t want to, or it just never happened. But 12% of respondents also said they couldn’t afford to raise a child.

The reality of childcare

Last year, Bowley reported that U.S. childcare costs were rising 1.5 times faster than overall inflation, up 5.2% year-over-year (YoY) in September.

Regional differences are also becoming more noticeable: New England was up 6.6%, for example, and the West North Central division surged 8.2% YoY as of September. Meanwhile, in the South, Nashville led major cities with a more than 6% increase from 2024 averages.

In the October note, Bowley highlighted that the share of households with more than one source of income making childcare payments each month is falling every year, most prominently among lower-income households. It stands to reason that paying for childcare has become so expensive that parents have little choice but for one of them to leave their jobs.

This “very much disproportionately impacts women,” Bowley added, “We’ve looked at how moms have traded in, to some extent, careers for childcare. One reason is that childcare has been, at least within CPI data, and very much so also within our own data, particularly sticky. It is still rising around 1.5 times the rate of overall inflation, which is a real pain point for a lot of families.”

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