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According to the Department of Labor, inflation hit a six-year high in June, 2.9 percent, causing prices to rise the sharpest since 2012 over the past year, and canceling out wage gains for the average American.
The cost of rent for a primary home grew 3.6 percent, the cost of gas and food have also increased, and economists anticipate prices may rise even more due to President Trump's tariffs on many imported goods. The Washington Post reports that prices have been growing at about the same pace as wages, "erasing any gains workers may have hoped to realize via bigger paychecks." Joe Brusuelas, chief economist at audit and consulting firm RSM, says, “The U.S. is now ensnared in a three front trade war which will, in the near to medium term, result in higher prices.” Since the Great Recession, wage growth has been lifeless.
Federal Reserve Chair Jerome Powell has called it “a puzzle” why wages aren’t rising faster. In an interview Thursday with National Public Radio, Powell said “we’re starting to see" some pick up in wages. “We now just in the last year or so, we have seen wages move up,” he said. Rising inflation puts the Fed in a difficult position. After years of low inflation, the Fed wants to see prices rises a bit more because it’s a sign of a healthy economy, but the Fed doesn’t want to see the economy overheat, which typically happens when inflation jumps too quickly.
