Steep inflation, meet slow wage growth

Inflation is still running faster than paychecks, and the gap is squeezing American households. The latest Consumer Price Index showed headline inflation at 3.4% year-over-year and core inflation at 2.5%—both slightly cooler than the previous month and both still above the Federal Reserve’s target. But when you stack those numbers against recent wage data, a clear problem emerges: prices have been rising faster than pay for the past year. Real wages have fallen, meaning the average worker’s paycheck buys less than it did twelve months ago. As Marketplace’s Keely Wells reported, analysts are split on what to make of it. Some see an economy on "cruise control"—unemployment is manageable, energy prices are elevated but stable, and consumers keep spending. The problem, as Justin Wolfers of the University of Michigan put it, is that spending is being fueled by depleted savings and mounting credit card debt. "The amount of stuff you can buy with your paycheck has literally fallen over the past year," Wolfers said. "That's not the way things are meant to be." Gary Broad of Deep Knowledge Investing called it a "bad print" for the average person, predicting more of the same until consumers finally pull back.