It's a sign of just how bad the Lehigh Valley's inflation had been that the most recent measurement -- 4.9 percent -- brought a collective sigh of relief.

The figure, from The Morning Call/Kamran Afshar Consumer Price Index last week, suggests that if your paycheck didn't rise by about 5 percent from March 2006 to last March, you're actually poorer because that's the amount prices on the products and services you regularly buy rose. Normal for this region is about 3 percent.

But after 2006, when the rate of inflation was a whopping 6.8 percent, 4.9 percent doesn't seem all that bad.

It's sort of like what happens when the temperature spikes into the hundreds. Suddenly, a mere 90 degrees Fahrenheit doesn't feel so hot.

Unfortunately, our economic forecast calls for another heat wave.

Kamran Afshar, the Bethlehem economist who conducts the quarterly price survey, said he believes inflation will rise "significantly" this quarter. The reason: the recent run-up in gas prices.

The impact of gas prices goes way beyond people's personal transportation costs. Many common consumer goods are affected, as well.

Take milk, for example. The minimum price of a gallon of 2 percent milk in this region jumped 14 cents, to $3.41, on Friday.

Lehigh Valley home prices, on the other hand, are relatively flat, reflecting continued weakness in the housing market.

At issue is a classic supply-and-demand imbalance. New listings of for-sale homes rose 25 percent in April, to 1,713 units, or about three times the number of homes sold.

Indeed, April was the 11th consecutive month that the number of homes sold fell, compared to the same month last year.

"Our inventory is skyrocketing," Loren Keim , who owns Century 21 Keim Realty in Allentown, said at a recent real estate conference. "The good market ended last spring."

The Lehigh Valley's job market, meanwhile, is just about as strong as ever -- high inflation and weakness in the housing market notwithstanding.

The Valley's jobless rate rose four-tenths of a percent to 4.2 percent in April, slightly above Pennsylvania's rate of 4.1 percent but below the U.S. average of 4.5 percent. Economists consider an unemployment rate of 5 percent to be full employment, meaning anybody who wants a job can get one, although not necessarily at a family-sustaining wage.

The area gained 1,900 jobs in April for a record total of 347,600, according to the Pennsylvania Department of Labor and Industry. Among the new positions were 700 in the professional and business services, which includes positions at travel agencies, landscaping companies and tour operators, and 500 in the leisure and hospitality sector.

sam.kennedy@mcall.com

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