A Humming Economy, Stronger Inflation, Eats Into Paychecks

Inflation is at 2.9% over the past 12 months, a gain last exceeded in late 2011.

A humming U.S. economy is pushing inflation up to levels that the central bank considers healthy. But there’s a downside: Americans’ paychecks are barely keeping up.

Consumer prices rose 2.9% over the past year, a rate last exceeded in late 2011, the Labor Department said Friday. Core prices—those outside of volatile food and energy-related expenses—climbed 2.4%, the biggest annual gain since September 2008.

The rising cost of things like rent, gasoline and health care is another sign the economy is kicking into a higher gear after years of slower growth. Businesses raise prices when they feel Americans are able and willing to spend more. For much of the expansion, inflation remained stubbornly low, prompting an unprecedented stimulus campaign from the Federal Reserve to counteract its anemia.

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