Inflation up, wages down for March, will continue in April. And the stock market doesn't care

We got INFLATION WATCH back in recent days, as the first reports from March are now coming in. And after a lot of concern about rising oil prices in the financial markets last month, now that we are seeing large price increases be reported, the markets are strangely unconcerned.

Start with the business side. While the Wall Street "experts" claimed Monday's report on the Producer Price Increase increase wasn't as much as expected, it’s still the 5th straight month that the PPI rose by at least 0.4%. And the 12-month change in PPI reached 4% for the first time under Trump 2.0.

In addition, March was only the first step in the increases in gas prices since the bombs started falling on Iran. As of April 15, AAA says that gasoline has gone up by 11%, and diesel up more than 13%. So it’s likely that April will show another increase in producer prices, and given that April 2025 had a decrease in PPI, the year-over-year change is likely to be well above 4% the next time we get that report.

That PPI report came after last week’s first look at prices at the consumer level.

The consumer price index increased a seasonally adjusted 0.9% for the month, putting the annual inflation rate at 3.3%, pushed by a 10.9% surge in energy costs. Both numbers were in line with the Dow Jones consensus. The annual rate was the highest since April 2024 and up from 2.4% in February.

However, excluding food and energy, core prices rose much less – just 0.2% for the month and 2.6% from a year ago, both 0.1 percentage point below forecast, indicating that underlying inflation was contained. There even were even pockets of outright price declines, as medical care, personal care, and used cars and trucks all fell during the month.

The Iran conflict was the story for the monthly inflation reading, as gasoline soared 21.2%, accounting for nearly three-quarters of the headline price increase, according to the BLS.

But even with slightly tamer core prices, a 2.6% increase is still higher than pre-COVID levels, and not much different than the 2.8% year-over-year increase we had in March 2025. It's also still elevated compared to the pre-COVID increases of 2% or below.

And this is before higher transportation prices for non-gasoline products can be passed ahead to consumers, so I wouldn't expect things to be better on the inflation front in April or coming months.

In addition, that 0.9% increase in consumer prices dwarfs the 0.2% increase in average hourly wages for March, meaning an inflation-adjusted loss of 0.6% for last month, and dropping real wage growth near 0% for the last year.

While year-over-year average hourly wages aren’t losing ground vs inflation like it was in 2021, 2022 and early 2023, I’ll also note that workers were still getting 4-5%+ wage increases over 12 months. And those raises were after a significant re-set of higher wages after the COVID pandemic broke out in early 2020.

Now we’re back to the 2018-2019 levels of 3.5% nominal wage growth, except inflation is much higher than we had in the late 2010s. That seems like the worst of both worlds to me.

So why is the S+P closing above 7,000 and markets are acting like things are back to some pre-war normal (which wasn’t so great to begin with)? And why are people pretending that everything is fine because of.....hopes for peace and AI boosterism? Here in the real world, prices are still going up from an already-higher level, wage growth isn’t keeping up with those higher prices, and there’s not much evidence that business will be able to pass on their higher costs to consumers later this year in order to maintain profits.

I don't get what's going on, and it's no wonder that we see record low consumer sentiment in a time when the markets want to live in a Bubble where the facts in the Real America don't have to seep in.