The price of your next haircut was decided by your neighbor's rent two years ago.
April 16, 2026
Original Paper
Rent Shocks and Services Inflation Beyond Wages
SSRN · 6463241
The Takeaway
Economists usually say the cost of services (like dining or dry cleaning) is driven by what workers are paid. This paper found a hidden 'rent-to-services' transmission: market rent inflation predicts general service inflation 12 to 24 months in advance, even if wages stay the same. Why? Because when rents go up, businesses have higher overhead and eventually have to pass those costs on to you. It means that the rental market is a far better 'crystal ball' for the future of the economy than we realized. For you, it means that if you see apartment prices spiking today, you can expect the cost of everything else in your neighborhood to climb in about two years.
From the abstract
Persistent services inflation has remained the central puzzle of the post-pandemic U.S. inflation episode. The standard forecasting framework attributes this persistence primarily to labor-cost dynamics: once wage growth is accounted for, little additional predictive information should remain. This paper documents a forecasting regularity inconsistent with that implication. Using U.S. monthly data (2016-2025), market rent inflation systematically predicts non-housing services inflation at horizo