Couldn't ask for a cleaner confirmation of our thesis for ongoing disinflation. The top five irreducible categories, making up 38% of index weight, contributed 18 bp to a headline inflation number that printed at 7 bp, therefore more than explaining the whole thing. The inescapable conclusion is that the other 62% of the basked must have been in outright deflation in May. Not clear this will change any thinking at the Fed, but it might help that December dot we'll see later today show two rate cuts, not one.
What you’re not hearing about wage income in the real world
Monday, June 24, 2024
Wage gains feel so bad to voters because they’ve been so good.
Update to Strategic View
Why are Biden’s approval ratings lower than Trump’s were four years ago, when now we are in an economic boom and then we were in a depression? Inflation is back to and below the Fed’s target, although the internal composition of the CPI basket is a mixed bag. The problem is that post-pandemic wage growth has been the highest in history, yet it is barely ahead of the cumulative inflation. Real purchasing power is intact. But it has grown at less than half the historical rate. Most significant, voters don’t understand that their wage gains were simply the result of inflation – rather, they see inflation having robbed them of wage gains that they worked for and deserve.