Steep inflation, meet slow wage growth

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**Kai Ryssdal** (0:26)
On the program today, data and history.
Doesn't get any better than that now, does it? From American Public Media, this is Marketplace.
In Los Angeles, I'm Kyle Rizal. It is Wednesday today. This one is the 12th of August. Good as it always is. To have you along, everybody. We have arrived at the point in this week where we have some data to chew on. And in a lot of ways, the news from this morning was pretty good. Inflation, of course, is the data du jour. Year on year, the headline Consumer Price Index rose 3.4 percent. Core, that is, less food and energy, as you know, up 2.5 percent. Both, yes, higher than the Federal Reserve want them to be, but also both a slight slowdown from last month's reading, which is good. What is not good is that when you stack today's inflation report up against the most recent wage data we've got, you notice pretty quickly that prices have been going up faster than pay has been going up over the past year. Real wages is the phrase you're looking for, and as Marketplace's Kayleigh Wells reports to get us going, them not keeping up is not great.

**Amy Scott** (1:48)
The reactions from analysts are kind of all over the place today. In one faction, things could be worse, says Connell Fullenkamp. He's an economics professor at Duke University.

**Connell Fullenkamp** (1:58)
The economy seems like it's on kind of cruise control. Everything's kind of working, maybe not wonderfully, but it's still kind of chugging along.

**Amy Scott** (2:05)
Unemployment isn't terrible. Energy prices are elevated, but stable. And he says a main driver of this cruise control economy is that people just keep spending.

**Connell Fullenkamp** (2:15)
There's still enough people in the economy who are doing well enough, who don't feel like they have to give up the habits that they've become accustomed to in terms of consumption. And there are enough of them to keep spending, to keep the prices marching up.

**Amy Scott** (2:30)
Then there's the more pessimistic view. Inflation is still higher than wage growth.

**Justin Wolfers** (2:35)
The cost of living is rising at a pace that feels genuinely uncomfortable.

**Amy Scott** (2:40)
Justin Wolfers teaches economics and public policy at the University of Michigan. And he says the numbers today didn't reveal any major new problems, but that just means it's more of the same bad news.

**Justin Wolfers** (2:51)
Prices are rising and wages aren't keeping up. And so therefore the amount of stuff you can buy with your paycheck has literally fallen over the past year.
That's not the way things are meant to be.

**Amy Scott** (3:03)
So life's more expensive and people are still spending money, which is only possible because everybody's spending every dollar that they have. Gary Broad is founder of a research and advisory firm called Deep Knowledge Investing. Credit card debt is up, savings is down, which is why Broad says the vibe check from businesses, think the stock market setting records, and the one from consumers look totally different.

**Gary Broad** (3:27)
Wall Street was celebrating. You know, it's less likely that the Fed will raise rates, which technically is true.
I think for an average person, this is a bad print.

**Amy Scott** (3:38)
Broad says life isn't going to feel any less expensive anytime soon, and more reports like this one are likely on the way. So the only way consumers can make the spending feel less bad is to do less of it.
I'm Kaylee Wells for Marketplace.

**Kai Ryssdal** (3:52)
Wall Street today, there is almost nothing traders like better than an understated consumer price index. Not of course because that means consumers won't be paying quite as much, but because, as you heard in that piece from the guy that Kaylee talked to, it means Chairman Warsh and the gang can now safely not raise rates at their next meeting. All of that, the caveat, of course, is for now. We will have the details when we do the numbers.
If you go to Table 2 in this Morning CPI Report and scroll on down to the line that says Fresh Vegetables, you will see those prices were down more than 2.5% month on month. Up, though, more than 6% for the year.
Now, the CPI is just one economic indicator among many. So today and for the next couple of weeks, we're going to be looking at some others, ones you might not be so familiar with. For our first go, we're going to stick with the general theme of vegetables. The Department of Agriculture puts out something called the World Agricultural Supply and Demand Estimates. They do it every month. And just like it sounds, it's best guess is that supply and demand for a bunch of crops, wheat, rice, eggs, milk as well. The August report came out today, and we called up an interested party.