Eco / CPI
The breakeven point for the March CPI increase, on a month-on-month basis,
to bring weekly earnings to zero in real terms is +1.3% versus the previous month,
equivalent to roughly 15.6% annualized. That is an exceptionally high value.
With a CPI figure at that level, real weekly earnings would be as follows:
Single Real Weekly Earnings YoY
- Total private: 0.00%
- Nonsupervisory: +0.18%
- Supervisory: -0.22%
Total Category – All Employees – Real Weekly Earnings YoY
- Total private: +0.39%
- Nonsupervisory: +0.64%
- Supervisory: -0.17%
What This Suggests
This shows that, despite the sharp increase in prices and even under an assumption
of very high monthly inflation, the US labor system remains strong. Wages and weekly
earnings are still able to support the market, even if concerns about inflation and
expectations will likely lead to greater prudence in consumption.
In other words, labor income is still acting as a buffer for the broader system,
helping explain why the market continues to show resilience despite rising price pressure.
Geopolitical Consideration
A second consideration is geopolitical. From a market and inflation perspective,
a rapid easing of the Iran conflict would help reduce inflationary pressure,
particularly through the energy channel. More broadly, any normalization in the
flow of oil, gas, and raw materials into international markets would likely help
ease some of the cost pressures feeding through the system.