Paychecks are growing, but so is inflation

Pay attention to inflation and how it eats into your buying power.  Watch the bond market.  When the bond market finally realizes that inflation will be an enduring threat, bond yields will move up to compensate for the lost buying power - and the value of your existing bonds will drop.  

From the Detroit News online:

Every first Friday of the month provides a bounty of data on the U.S. labor market. The unemployment rate gets most of the attention. But when 91percent of Americans in the work force have jobs, we need to look at what those jobs pay...

Average weekly earnings have been growing each month since December, and they are almost $37 per week higher than two years ago. That's a 5 percent pay increase for the average worker. Not bad, considering the sour economy in the past two years.

But here's why many don't feel as if they've gotten a raise: Inflation has risen slightly more than average pay.

Consumer prices are up 5.5 percent over the same two years. In other words, that average paycheck today has a little less buying power than that average paycheck two years ago.

Yes, a lot more of that pay goes toward food and energy costs. The $37 average wage increase won't even fill up the gas tank.

While getting a steady paycheck is key for a growing economy, seeing that paycheck grow steadily is vital for a sustainable economy.

Link: http://www.detnews.com/article/20110530/BIZ01/105300317/1488/BIZ01/Paychecks-are-growing--but-so-is-inflation