We have been seeing consistent Commodity Deflation and Service Inflation.

This month we see Health Insurance Inflation and Food Inflation, too.

There has been a considerable amount of discussion regarding nominal wages rising and real wages rising. This was not differentiated during the prior administration. Real wages are adjusted for inflation. Nominal wages are not adjusted for inflation. Normally when we have high inflation we have low unemployment. Normally when we have high unemployment we have low inflation. We have been experiencing low inflation and low unemployment comparable to what we saw during the late 1990s and early 2000s.

What was recorded, non-seasonally adjusted, and what was reported for theJune 2019 CPI report?

The headline data reported was 0.1% month to month inflation and 1.6% annual inflation before seasonal adjustments. Here is the problem: Inflation measures the costs of a basket of goods and services with "the same" basket of goods a year ago, or a month ago. The basket of goods and services change from month and from June to June through the individual indices used. The headline number is different from the CPI-U Urban Wage and Clerical Worker inflation. That value came in at just 1.44%.

Health Insurance Inflation came in at 13.7%. We have been experiencing double digit inflation for health insurance for months. The data is finally catching up with what the Kaiser Foundation has been reporting - premiums are rising and deductibles are rising. (See "Obamascare: Kaiser Report on Health Care Costs."

If the basket of good is held constant then inflation was 1.75%.  We saw annual deflation in Energy, Apparel, Medical Care Commodities, Recreation Commodities, and Education and Communication Commodities. Shelter costs rose by 3.5% for rent or the home ownership "rent equivalent." Household Operations are up 5.2%. Water, sewer, and Trash Collection are up 3.3% We may not notice the difference. Energy cost savings may be going towards higher food costs.

The Phillips Curve is Broken. The scatter graph at the top of this article plots inflation against unemployment. In a normal market inflation under 2% would generate unemployment over 8% (Top Oval.) We are seeing both low unemployment and low inflation (Bottom Oval, Yellow dots are 2019, White are 2018.) Participation is low, historically speaking. The effective unemployment rate is closer to 10.02% (The top oval.) Maybe it isn't broken, just the measuring of unemployment.

It's the Economy.