▲ 275 points
back
306 comments
Remember this next time you get your yearly review/raise. 4.2% is what you need to stay even, anything less is a pay cut.
It means you already had the paycut, you need to have at least %4.2 rise + reimbursement to make even.
In high inflation countries you often get a revision every 2-3 months and you get a rise that is higher than the official inflation, as a result this solidifies the inflation and boosts the economy as everyone immediately buys whatever they can before it becomes more expensive. It's a vicious cycle.
Not necessarily, depends on the distribution of your own expenses. If you deviate from the average urban household (lets say, you have a particularly long commute or your car isn't as fuel efficient as the average. Look at the increase on fuel prices, 40.5%!).
If you're at $5,000/month, a 4.2% raise puts you at $5,210. If you're spending $600/month on gas (not unreasonable for someone that drives an SUV and lives in the suburbs instead of in the urban core), you still come out behind.
Typically, you need a little more to make up for the difference in how much more taxes you pay at the marginal end vs the average for your total income...
The median earner with a standard deduction would need a ~4.7% raise to stay even...
"Inflation" is also increasingly distributed unevenly. The top 10% continues to make up a larger and larger portion of spending. It is entirely possible for ~4.2% inflation to be substantially higher (or lower) for the median household than the overall reported number.
Much more since the numbers are cooked anyways. Car model N cost 10k, and car model N+1 costs 15k, if N+1 has 2 more airbags, one more gear, a keyless starter it will be counted way under 50% inflation, even though you pay 50% more.
Most of the average joe's money is spent on housing + food + energy these things are all way above the calculated """average""" inflation
> 4.2% is what you need to stay even
On average, nationally. Look up your state or metropolitan-area CPI. Or better yet, track your actual expenses and project forward.
Most employers in the US don’t realize this and act like cost of living adjustments are major rewards if they do them at all.
This never made sense to me. Doesn't this assume you are spending ALL your income though?
If I make 100K and get a 3% increase, that's $3000 more.
But if I only spend 30K to live, and my living expenses go up 5%, that's only a $1500 increase to my living expenses while I earned $3000 more that year. So how is that a pay cut if I actually have even more money left over that basically just goes into my investment account then.
Also, any asset that isn’t appreciating at least 4.2% is losing value.
Ah…inflation.
This is why it's important to get paid in stock. I get an automatic extra 100k a year if inflation runs hot!
Many people here make more than they spend, and this is simply inaccurate when that's the case.
edit: I've explained how this works in a reply below.
Paradoxically, inflation has contributed to me taking a sabbatical. While I live in a LCOL area and made ~140k/year it just no longer felt worth it to work as I saw my retirement accounts start to match and exceed my salary in yearly gains. I do plan on going back to work in a part time manner, but inflation has killed any reason for me to work hard at a job for that level of salary. Furthermore, the feeling of "what's the point" around white collar work has never been more intense.
This actually makes 0 sense. Like, do you even understand what you're saying? The value of your savings is decreasing at a faster rate than ever before, so its a good time to stop saving and spend it?
The stock market increasing is not the same thing as inflation. What you're saying makes sense only if you are referring to stock market valuation... strictly retiring because inflation is high makes no sense.
I don't understand this point of view. $140k in a LCOL is a fantastic salary. Median US household income is $83k/yr.
It feels more likely your investment account gains are driving your decisions. Stock gains are also driven by inflation though!
I can sort of understand the feeling though, I just recently got a 2.5% raise for "inflation", which hardly feels like it's making a dent.
I feel the same. Investments are shooting up and wages stink.
UK has very high taxation now so working full time doesn’t bring in as much as a decent portfolio.
Are you assuming yearly wages not increasing to match/exceed inflation every year?
The logical point here doesn't make much sense to me otherwise.
If your retirement account is making more than 140k/year. You are probably in late stages of career, and of course have completely different incentives that also play into 'what's the point'.
If my retirement account was making more than my salary, then I'd also be asking myself 'what is the point' -> Regardless of inflation.
You're still cutting your annual income in half though. That's pretty big no?
It sounds like either way you could just use a break. If you have a house and retirement is tracking inflation, you can use the time to reset and figure out a career change.
Equities rise and fall. Unless you fully cash out that stuff can materially drop and if you do materially cash out - it can inflate away.
Sorry to be a downer but there is no certainty on the future especially with the level of chaos being sown in the western world as a function of a few key people.
I understand that salaries might have been stagnant and with wages not keeping with inflation it doesn't seem to make sense to continue working.
The stock market often aligns with inflation. After all if the companies growth is not beating inflation what exactly is the point really? But that also comes at the expense of not paying people their due worth and incrementing below inflation rate.
But past returns do not guarantee future results. Stock markets ebbs and flows. It will take a blip, not even a crash, to impact those retirement accounts.
IMO this is a risky idea especially if there are jobs available.
I would never, ever leave work regardless of the pay.
Regardless of your skill and reputation, time off can quickly put you below the bar for even getting a call-back, and you lose access to relevant lessons.
You'll be shocked at how irrelevant you become, and how quickly the retirement accounts will give up the gains of the last 3 years (particularly when this 2026 IPO summer terminates US equity markets).
The feeling of "What's the point" might have little to do with work, and more to do with (finally) losing faith in ambition. If so, don't worry: the best comes after we put aside dreams.
Up 4.2% (2.9% core, i.e. stripping out food and energy) over the last 12 months before seasonal adjustment.
The higher-frequency data are more concerning. CPI “increased 0.5 percent on a seasonally adjusted basis in May, after rising 0.6 percent in April” and 0.9 percent in March [1]. (0.3, 0.2, 0.3 percent for December, January, February, respectively.)
So a linear trend of 6% from March, closer to 9% if one extrapolates the March-April-May quarter. Almost all of that driven by food and energy. Core spiked to 0.4% MoM in April, but calmed down to 0.2% in May, on trend with pre-war numbers. It’s up 2.9% YoY, but trending a bit lower. (Looked at another way, we’ve already “booked” 2.5% of inflation for ‘26. If we continue at 0.5% MoM, we close the year +5.6%. Even if it drops to pre-war 0.2%, we’re still going to be +3.8%. Given the resumption of hostilities, I’m betting we’ll be closer to the former.)
Together with the jobs numbers, it would be weird for an independent Fed to not raise rates.
> Together with the jobs numbers, it would be weird for an independent Fed to not raise rates.
Not really. They may believe the inflation is driven by supply shocks, not excess demand. For example, the oil blockade. Raising already restrictive rates wont increase the supply of oil.
They don't even need to be right. If they simply believe this is what's driving inflation, they could decline to raise rates without that necessarily indicating a lack of independence.
Personally I expect the FED not to be independent and to let inflation run a little hot while lowering rates to attack the debt from 2 angles. But even still, its not true that high CPI + not lowering rates = non-independent fed
Here are some N-year rolling total inflation charts to put this datapoint in a longer-term perspective: https://totalrealreturns.com/inflation . Zooming out always smooths the noise.
> Prices are up +4.25% in the past year, and +24.49% in the past 5 years, according to the latest CPI data released Jun. 10, 2026. The price level has approximately doubled (2.01x) today compared to August 1999.
Not knowing if that's good/bad, as it is without any frame of reference, so the same data for Spain looks something like this:
Prices up +3.2% in the past year, up +22.4% in the past 5 years. Compared to 1999, a 1.88× difference, and if you want to compare since when it doubled, it'd be around September 1996. This is according to a tool from INE, Spain’s national statistics: https://www.ine.es/varipc/index.do?L=1
That shows that it’s been since 1991 since we saw similar five year increases in prices. Which is a long time. You also have to be careful not to zoom out so far you get into the “we all die anyway” scale where you’re not really tracking things that are meaningful to on-the-ground, as-lived reality
1918 isn't very relevant to modern living. And nobody wants to go back to the stagflation of the 1970s. And that scale is logarithmic.
Graph it without the logarithmic scale and draw a curve through the 1982-2018 data and the recent spike will explain why people are complaining about it.
Do understand actual policy decisions: https://www.richmondfed.org/publications/research/econ_focus...
Zooming out in what sense? Those rolling charts don’t mean much imo. Year over year change is a pretty good perspective and a tick up like this is not great.
Worse is coming and the markets seem to be in complete denial about it.
Oil has only really maintained the ~$100/barrel price because of record SPR releases worldwide. Also, that $100 price is kinda fake because it's a future price. The spot prices got much higher. Well, that runway is coming to an end. If the Strait of Hormuz re-opened today , we'd still be facing an energy shock. Plus there's famine coming.
Now the US won't run out of oil or refined petroleum products. The uS is now a net exporter. But it's a global marekt so the prices are going to go way up. And some countries and heavily dependent on oil for electricity. They are going to face blackouts.
So even though fertilizer shortages are skewed towards the Global South, food prices too are global so they're going up too.
In 1973, the energy shock took ~6 months to manifest [1].
But I think the real problem is dynamic pricing. Inflation is insidious. People start raising prices on the expectation of rising prices, thus causing prices to rise. But so many industries now are going well beyond that by essentially colluding through AI tools (eg RealPage) to further raise prices.
I honestly don't know how this ends without a deep, long recession.
[1]: https://paulkrugman.substack.com/p/oil-crises-past-and-possi...
Prices have doubled since 1999!? Restaurant prices near me have doubled since 2015, easily. And that's not counting delivery going from free to 25% of the meal cost.
The worst part of this report is my diminished faith in the numbers.
Serious question here: Can we trust these numbers out of this admin? I've not been super plugged into the latest news out of the BLS, but I seem to remember a lot of political firings in the 'econ' part of the government.
I do not mean to be glib here either or start a flame war. I am genuinely asking.
considering Iran War is likely to still be happening January 2029, imagine what costs will be like by then
every single day $5/gas is taking a BILLION dollars out of the economy that could have gone elsewhere
but it could be worse, we could be innocent civilian Iranians having the US bomb their water and power plants this week
Remember this is the number the Government is measuring and reporting. The "real" inflation that every day people feel in their wallet is significantly higher.
All of the increase is from energy. Oil prices.
https://50centadjustedforinflation.com/
50 Cent is up 1 cent to 113 Cent.
The worst part is that the 4.2% number is a floor on the actual inflation numbers. The US CPI has been lagging retail inflation for quite some time now (see 'hedonic regressions' by the BLS).
Is this with the new method of counting what inflation means? (trimmed mean, without outliers)
Take on debt, as much as possible. Otherwise, inflation will end all. Inflation eats debt.
U.S. consumer wages index down -1% this past three months. also. We almost briefly started climbing positive in January, but nope, another 1% drop, sigh.
See also the +25% inflation / -1.2% net wages after inflation over five years chart here, for those unfamiliar with how inflation % press releases are misleading over time. If household spending power is -1% after +4% inflation, then that inflation probably isn’t healthy for your country’s economic future, etc.
https://www.statista.com/chart/32428/inflation-and-wage-grow...
(I also suspect the wage index itself is disguising about the total wages paid index dropping like a stone, but haven’t done the math to chart it yet myself yet.)
This is not inflation. The is a supply and demand issue. There are two factors: increasing energy costs due to the season and the rising costs of AI data centers (a big impact in my area). And secondly, the disruption of the oil supply during the continued Middle East conflict. These two issues have caused an energy price spike. Yes, it will eventually result in wide spread costs. But, as the components in the above report indicate, it is not yet spread widely. We are all sensitive to gas price fluctuations. We'd all be better off if we admitted that alternative fuels, other than nuclear, will never provide the requisite energy required to advance civilization. It's time to quit pretending that it will and start building nuclear power plants. Wind and solar farms are not the answer. And end the Iraq war aggressively. It's been nearly 50 years and it's clear that Iraq will never negotiate honestly. So Trump and his allies need to stop pretending and end it. And the same applies to the Ukraine-Russia conflict - no more US tax dollars to the Ukrainian dictator.
The Iran conflict will continue on a low flame (occasional pinpricks like now) forever.
It serves the US Energy Dominance Agenda against China, Japan, India and the EU.
The Trump administration does not care about "its" population. There were already rumors early in the Trump term that Trump would not mind a recession so that his real estate cronies could buy cheap foreclosures.
So it is all a double win for the oligarchs. The stock market is still fine, nothing else matters.
Regressive consumer tax due to tariffs?
I find it interesting how many people act like inflation doesn’t exist especially with salaries.
If you made 100k in say 2000 the equivalent would be 200k today. If you go by median house price your salary should have doubled since 2015!