The personal consumption expenditure (PCE) index, a key inflation metric preferred by the Federal Reserve, issued a new report Friday that found core inflation rose by 4.9% in December -- the highest single increase seen since September 1983. 

According to the PCE report, the core price index excluding food and energy was slightly more than the 4.8% forecasted by Dow Jones and the 4.7% growth seen in November. Personal income rose 0.3% for the month and consumer spending declined 0.6%.

The data can be attributed to lingering fears among American consumers about the Omicron variant of COVID-19. As cases began to soar last month, Americans appeared to begin cutting back on their spending at restaurants or shopping at retailers. Several cities also began reintroducing certain restrictions like proof of vaccination requirements and indoor mask-wearing to curb the spread.

The Labor Department released its Employer Cost Index that found total compensation costs for civilian workers increased 4% over the past 12 months, the fastest pace since 2002. 

Jason Furman, an economist at the Harvard Kennedy School and former chairman of the Council of Economic Advisers to former President Barack Obama, posted on Twitter that wages have been left behind as inflation began to pick up steam in the last year. He said that these dynamics show that wages are “now lower than they were prior to the pandemic” and “well below their pre-pandemic trend.”

The Commerce Department noted that a decrease in spending on goods was partly offset by Americans spending $52 billion more on services instead. However, Furman warns that service-sector inflation has also picked up and is likely to continue rising as the virus comes under control.

"If you are counting on people spending more on services [and] less than goods to dramatically reduce inflation, this figure should really concern you. Services inflation has picked up quite sharply over the last several months. And more of it to come if the virus comes under control," wrote Furman.