Inflation at 3.8% overtakes wage growth for first time since 2023

Inflation rose to 3.8% in April, its highest level in nearly three years, as the war in Iran pushed up fuel, transportation, and food costs.

According to the data released by the Bureau of Labor Statistics yesterday, consumer prices increased 0.6% from March, while core inflation, which excludes food and energy, climbed 0.4%.

It marks the first time since 2023 that living costs rose faster than wage growth in the US.

Average hourly wages slowed to 3.6% in April, increasing pressure on household budgets and affordability.

The labor market also showed signs of slowing. The US economy added 151,000 jobs in February, below forecasts but above January’s revised gain of 125,000 jobs. 

The unemployment rate edged up to 4.1%, while federal employment fell by 10,000 amid government cost-cutting efforts. Healthcare added 52,000 jobs, while retail lost 6,000.

Energy costs remained a major driver of inflation. Rising energy prices, up about 18% year over year, made up more than 40% of the monthly inflation increase.

Grocery prices recorded their biggest monthly increase in nearly four years. The “food at home” index rose 0.7% in April, leaving grocery prices 2.9% higher than a year ago.

Fresh vegetables saw prices climb 2.3%, marking the category’s largest monthly increase since 2010.

Coffee prices also rose sharply because of poor harvests in Brazil and Vietnam, higher shipping costs, and strong demand. Beef prices increased due to low cattle supplies and rising operating expenses.

Oil prices have surged more than 70% this year, lifting the national average gas price to $4.50 per gallon. Higher fuel costs also pushed airfares up 20% from a year earlier after jet fuel prices jumped sharply following the Iran conflict.

Stripping out volatile items, core inflation still reached 2.8% last month, exceeding the Fed’s target.

At the same time, US household debt climbed to a record $18.8 trillion in the first quarter of 2026, according to the Federal Reserve Bank of New York. Mortgage debt reached $13.2 trillion, while auto loans rose to $1.69 trillion.

Economists warn that high energy costs and supply chain disruptions could keep inflation elevated through 2027, with lower-income and middle-class families facing the greatest financial strain.