Markets were jerked around by news out of the Middle East again this week as traders are quickly reacting to any potential hint of short-term direction for energy prices.  Optimism continues to reign as oil prices were ultimately lower for the week.

The Bureau of Labor Statistics (BLS) released the May inflation report this week and it showed that the annual inflation rate rose above 4% last month as expected.  The headline inflation rate now stands at 4.2%, up from 3.8% in April.  Stripping out the more volatile prices of food and energy, the core inflation rate rose from 2.7% in April to 2.9% in May.

Rising prices wouldn’t be as painful to consumers if wages were keeping pace with inflation, but now they aren’t.  Prior to Covid, wages typically grew at a rate between 2% and 3% per year as inflation remained below 2.5% between 2011-2021.  Although wages are still growing at a faster pace than before Covid, at 3.4% wage growth now trails price inflation.

This is where more households will really start to feel the bite of inflation if we don’t get the red line back below the blue line as soon as possible.

Have a great weekend.

Jack C. Harmon II, CFP^®, CIMA

Principal, Harmon Financial Advisors

Registered Principal, Raymond James Financial Services

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