The BLS chart clearly illustrates the convergence of core (x/ food and energy) inflation and all items.   Core inflation is up 2.3 percent y/y, which is a little hot given its recent history.  Here’s the BLS commentary,

The index for all items less food and energy has risen 2.3 percent over the last 12 months. The index for shelter has risen 2.1 percent over the period. The apparel index has risen 4.9 percent, the medical care index has increased 3.5 percent, and the index for new vehicles has risen 2.5 percent.

Also note the decline in real earnings.   The inflation tax is eating away any nominal wage gains and is one reason why aggregate demand and this recovery is relatively weak, in our opinion.   The BLS notes in their Friday release,

Real average hourly earnings for all employees fell 0.1 percent from February 2012 to March 2012, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. A 0.2 percent increase in the average hourly earnings was more than offset by a 0.3 percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings fell 0.4 percent over the month due to a 0.3 percent decline in the workweek combined with the decline in real average hourly earnings. Since reaching a peak in October 2010, real average weekly earnings has fallen 1.1 percent.

Real average hourly earnings fell 0.6 percent, seasonally adjusted, from March 2011 to March 2012. The decline in real average hourly earnings combined with a 0.6 percent increase in average weekly hours resulted in unchanged real average weekly earnings over this period.

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