--- title: 3 Signs Inflation May Be Lurking Just Around the Corner description: While consumer prices haven't been rising yet, several signs point to higher wages in the future. authors: - name: Taylor Tepper url: https://money.com/author/taylor-tepper-3/ at_money_since: 2013 articles: 168 covers: - Economy and Politics - Banking - Business - Career Advice - Credit - Credit Cards - Education - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Retirement - Shopping - Taxes social: - https://x.com/TaylorTepper former_staff: true published: '2015-03-12T11:11:37.000Z' modified: '2015-03-12T11:11:37.000Z' section: Economy and Politics tags: - bonds - Fed - Federal Reserve - inflation - Jobs - portfolio - stocks - Tips - Wages word_count: 506 canonical: https://money.com/inflation-wage-growth-lurking-economy/ type: Article source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![150312_INV_Inflation](https://img.money.com/2015/03/150312_inv_inflation.jpg?crop=0px%2C1906px%2C2912px%2C1637px&quality=85) After fits and starts and ups and downs, the American economy is finally looking strong — especially compared to Europe. U.S. gross domestic product [grew](http://www.tradingeconomics.com/united-states/gdp-growth) 2.2% and 5% in the last two quarters of 2014, while the unemployment rate [dropped](http://www.bls.gov/news.release/empsit.nr0.htm) in February to 5.5.%. Yet inflation and wage growth, which are natural outgrowths of an accelerating economy, haven't seemed to materialize. At least not yet. Despite years of unconventional bond buying and warnings from [politicians](http://economics21.org/commentary/e21s-open-letter-ben-bernanke) and [economists](http://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/), consumer prices have actually risen less than the desired rate of the Federal Reserve. The Consumer Price Index [declined](http://www.cnbc.com/id/102454987) 0.7% in January, the steepest drop since 2008, thanks to cheap oil. If you strip out volatile energy and food prices, so-called core inflation only [rose](http://research.stlouisfed.org/fred2/series/CPILFESL) 1.6% in January over the past year, well below the Fed's 2% target. In fact, prices haven't hit that Fed target in almost two years. Your paycheck has [hardly](http://research.stlouisfed.org/fred2/series/CES0500000003) fared any better. But lately, there have been signs that show America's workforce might at long last receive an overdue raise. About 70% of companies have said that wages are beginning to outpace inflation, [according](http://www.usatoday.com/story/03/11/cfo-outlook-duke-cfo-magazine-survey/70152074/) to the latest Duke University/CFO Magazine Global Business Outlook Survey. Industries like technology, manufacturing and health care should see wages grow by 3%. A small business [report](http://www.nfib.com/surveys/small-business-economic-trends/) points to a tighter labor force, as 26% of companies raised compensation (although that includes benefits like health care), and almost half said finding a qualified employee proved difficult. What's more, the 10-year break-even inflation [rate](http://research.stlouisfed.org/fred2/series/T10YIE), which is a gauge of how much prices are expected to rise annually over the next decade based in part on the yield of 10-year Treasury inflation protected securities — has been ticking up lately to about 1.8%, after touching a recent floor of 1.5% in the beginning of the year. The rate, to be fair, is still well below levels seen before oil's drop. So is inflation and wage growth finally set to take off? That's a question for Federal Reserve Chair Janet Yellen, who has said the Fed will remain "[patient](http://fortune.com/2014/12/17/fed-says-it-will-be-patient-about-future-interest-rate-hikes/)" when raising short term interest rates while price growth remains so benign. This six-year herky-jerky recovery has made fools of many prognosticators, especially those who have shouted loudly that inflation is nigh. "Given that CFOs expect continued strong employment growth, it is surprising that wage pressures are not even great," says Duke finance professor John Graham. Indeed. What does this mean for your portfolio? Well, one option is to add to your Treasury Inflation-Protection Securities (TIPS) holdings, especially short-term TIPS if you're a conservative investor (though this should still be only a satellite portion of your investments). TIPS have struggled recently after outperforming equities by 11 percentage points in 2011, and investors have started to put their money elsewhere. But the best time to get inflation protection is when there's little fear of rising consumer prices — and when inflation-protected bonds are cheap, like now. For instance, the Vanguard Target Retirement 2015 fund currently allocates about 8% of its portfolio to short-term inflation protection. ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/inflation-wage-growth-lurking-economy/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Economy and Politics", "item": "https://money.com/economy-and-politics/" }, { "@type": "ListItem", "position": 3, "name": "Inflation", "item": "https://money.com/inflation/" }, { "@type": "ListItem", "position": 4, "name": "3 Signs Inflation May Be Lurking Just Around the Corner" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/inflation-wage-growth-lurking-economy/#webpage", "url": "https://money.com/inflation-wage-growth-lurking-economy/", "name": "3 Signs Inflation May Be Lurking Just Around the Corner", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2015-03-12T11:11:37.000Z", "mainEntity": { "@id": "https://money.com/inflation-wage-growth-lurking-economy/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/inflation-wage-growth-lurking-economy/#breadcrumb" }, "dateModified": "2015-03-12T11:11:37.000Z" }, { "@type": "Article", "headline": "3 Signs Inflation May Be Lurking Just Around the Corner", "articleSection": "Economy and Politics", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2015/03/150312_inv_inflation.jpg?crop=0px%2C1906px%2C2912px%2C1637px&quality=85", "width": 1012, "height": 569, "caption": "150312_INV_Inflation" } ], "author": [ { "@type": "Person", "name": "Taylor Tepper", "url": "https://money.com/author/taylor-tepper-3/", "@id": "https://money.com/author/taylor-tepper-3/#author", "image": "https://img.money.com/2014/05/14-05-21_bio_author_tepper1.jpg?quality=85&w=190&h=190&crop=1", "email": "ttepper@moneymail.com", "sameAs": [ "https://x.com/TaylorTepper" ] } ], "publisher": "https://money.com/#organization", "datePublished": "2015-03-12T11:11:37.000Z", "description": "While consumer prices haven't been rising yet, several signs point to higher wages in the future.", "abstract": "While consumer prices haven't been rising yet, several signs point to higher wages in the future.", "@id": "https://money.com/inflation-wage-growth-lurking-economy/", "inLanguage": "en-US", "dateModified": "2015-03-12T11:11:37.000Z", "wordCount": 506, "keywords": [ "bonds", "Fed", "Federal Reserve", "inflation", "Jobs", "portfolio", "stocks", "Tips", "Wages" ], "about": [ { "@type": "Thing", "name": "Political economy", "sameAs": [ "https://en.wikipedia.org/wiki/Political_economy" ] }, { "@type": "Thing", "name": "Inflation", "sameAs": [ "https://en.wikipedia.org/wiki/Inflation" ] } ] } ] } ```