Price increases outpacing wage gains
While we are lectured that inflation may, possibly, be worth watching, but poses no real threat to the American economy, the data tell a somewhat different story.
According to Bloomberg, inflation is currently outpacing the wage gains workers have enjoyed coming out the government-mandated shutdowns:
Americans are enjoying outsized pay boosts this year from desperate employers, but the raises are failing to keep pace with surging prices for everyday goods.
U.S. wages likely posted a third strong monthly gain to fuel a 3.6% increase in June from a year earlier, according to economists’ forecasts ahead of the Labor Department’s jobs report due Friday. Companies including FedEx Corp. and Olive Garden owner Darden Restaurants Inc. are raising wages to attract staff.
At the same time, prices for everything from milk to car rentals and gasoline are rising at a rapid clip, eating into those income gains. The Federal Reserve’s preferred consumer-price gauge rose 3.9% in the 12 months through May, the fastest since 2008.
So wait…prices are rising faster than wages…which are also rising? Surely such things aren’t possible, with the Federal Reserve and its claque assuring us these are just passing blips, of no importance whatsoever.
Except…they may be a sign of things to come:
FedEx is a prime example of how the labor dynamic is fueling inflation. The delivery giant is increasing wages to attract employees as shipping volumes grow and service delays mount. The pay rises are flowing into higher rates and surcharges to customers, which executives say is necessary to sustain profits.
Price increases all around! But really, there’s nothing to worry about, the smartest people in the room say. Everything is under control. Fine…but we’ll keep watching the data – just in case the smartest folks in the room also happen to be the ones most in need of a reality check.