Wages outpace falling inflation

With a similar caveat regarding one month of data, the easing of housing costs in June is a welcome development. We know that rental inflation, particularly for new , has eased in recent months, and that it takes numerous months for this slower inflation to show up in the CPI. CEA’s housing model (see the link to our X thread above) is designed to capture these lag dynamics, and in June its forecast downshifted a bit. This suggests future prints could continue the improvement we saw in June. To summarize, inflation, and even prices themselves (i.e., the price level vs. the growth rate), fell in a number of consumer-salient categories in June leading the overall index to contract slightly. Housing inflation eased a bit in June, gas and car prices fell, and monthly grocery inflation has averaged zero so far this year. At the same time, the persistently strong US labor market has been generating a pace of wage growth that’s been handily and repeatedly beating price growth. For each of the last 16 months, for example, hourly wages for middle-wage workers have outpaced inflation on a yearly basis, including by 1% in June.