Shoppers pay for their purchases at a Chicago Target store on Friday, 24 November 2017. The cost of food, shelter and gas have all risen significantly in the past year, according to federal data. Photo: Antonio Perez / Chicago Tribune

By Heather Long
13 July 2018

(The Washington Post) – Prices rose at their highest clip since 2012 over the past year, the Labor Department reported Thursday.

The 2.9 percent inflation for the 12-month period ending in June is a sign of a growing economy, but it's also a painful development for workers, whose tepid wage gains have failed to keep pace with the rising prices.

The cost of food, shelter and gas have all risen significantly in the past year. Gas skyrocketed more than 24 percent, rent for a primary residence jumped 3.6 percent and meals at restaurants and cafeterias rose 2.8 percent.

Prices have risen roughly at the same rate as wages, erasing any gains workers may have hoped to realize via bigger paychecks.

"While the labor market remains historically tight, the pace of U.S. inflation is now outpacing wage gains late in the business cycle," said Joe Brusuelas, chief economist at RSM, an audit and advisory firm. "The U.S. is now ensnared in a three front trade war which will in the near to medium term result in higher prices."

For workers, more pain may be coming, as economists are concerned that prices could rise further due to President Trumps tariffs on many foreign imports. Trump put a 20 tariff on foreign washing machines earlier this year, and the inflation report Thursday showed more than a 13 percent spike in laundry equipment over the same period last year.

"Expect rising transportation costs to start getting passed on to us, along with the tariff induced jump in costs," said Peter Boockvar, chief investment officer of Bleakley Advisory Group.

Wage growth has been lackluster since the Great Recession. Recently, unemployment fell to one of the lowest levels since 1969 and business leaders keep complaining they can't find enough workers. Typically, companies raise wages sharply in this kind of environment, but average hourly earnings are still stuck below 3 percent, a low level historically. [more]

Inflation hits 6-year high, wiping out wage gains for the average American

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