There were two important reports on the U.S. economy released this morning. First, data from the Bureau of Labor Statistics (BLS) showed that wholesale inflation pressures in America firmed last month, as the producer price index for final demand (PPI-FD) rose by 0.5 percent. That was a big reversal from March’s 0.1 percent decline and one of the largest monthly increases recorded during the current economic cycle. Energy and food costs jumped in April but even “core” PPI-FD, which excludes these volatile components, still rose by 0.4 percent. That was the biggest gain since January 2016 and it suggests that recent wholesale inflation pressures have been broad based. Measures of annual growth are also at or near cycle highs, which should make it easier for officials at the Federal Reserve to justify another interest rate hike at the June Federal Open Market Committee (FOMC) meeting. Confirmation, though, will be needed from tomorrow’s update on the consumer price index (CPI), as well as the PCE-deflator later this month.
Elsewhere, a report from the Department of Labor showed that the number of Americans making first-time claims for unemployment benefits totaled 236K in the week ending May 6th. That was a decrease of 2K from the prior week’s figure, much better than anticipated, and one of the lowest headline readings on record. This was also the 114th weekly print below 300K in a row, a pattern believed to be consistent with an overall healthy labor market. Moreover, initial jobless claims have fallen by 21K over the past two weeks, suggesting that April’s rebound in nonfarm payrolls growth has likely continued into May. Jobless claims cannot remain this low forever but since demand for unemployment benefits tends to spike ahead of a recession, the latest data is an encouraging sign that the current economic expansion still has some room to run.
Sources: Econoday, Bloomberg, U.S. DoL, FRBSLPost author: Charles Couch