U.S. consumer prices increased by 3.0% in the year period ending June 30, 2023, according to the Bureau of Labor Statistics. This marked the slowest recorded rate of inflation in over two years. At that time, prices were only just beginning their historic rise caused by a combination of surging demand, crippled supply chains, and hampered production.
The headline figure was a relief to the market and Wall Street, which rose steeply on the news. The closer that the Federal Reserve comes to its goal of bringing down inflation to 2% or less without sparking a recession the more jubilant investors and businesses have become.
Despite getting closer to the Fed’s inflation goal, there are structural issues in the economy that will make getting the rest of the way to the 2% target very difficult. Chief among these will be labor costs which in the construction sector were rising faster at last measurement than at any time in recorded history.
During the first quarter of 2023, construction wages rose 5.7% year-on-year, its fastest pace since in at least the last 20 years, and one-third faster than their peak growth rate during construction’s previous boom in the mid-2000s.
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