There were two important reports on the U.S. economy released this morning. First, initial claims for unemployment benefits ended last week at 209K, according to new data from the Bureau of Labor Statistics. That was a decrease of 13K from the prior week, the 227th sub-300K print in a row, and the lowest headline reading since April. Altogether this suggests that employers remain reluctant to let go of talent in the tight labor market. Moreover, since jobless claims tend to head sharply higher ahead of a recession, the latest return to an almost half-century-low is yet another piece of encouraging evidence that the now record-length economic expansion in America likely will not be ending any time soon.
Elsewhere, household inflation pressures picked up slightly, according to the Bureau of Labor Statistics. Specifically, the headline consumer price index (CPI) rose by 0.1 percent in June, and the “core” index, which strips out the volatile food and energy components, rose by 0.3 percent. Both figures were above estimates, helped in part by the largest increase in home furnishings and operations prices since 1991, arguably a side-effect of the trade war (tariffs). Although not the Fed’s preferred measure of household inflation, the June CPI data support chair Powell’s earlier suggestion that recent weakness in inflation will prove to be transitory. Add to this the overall uptick in positive economic surprises seen so far in July and it could be harder for monetary policymakers to justify being as dovish as some market participants expect at the FOMC meeting later this month.
Sources: Econoday, U.S. Department of Labor, FRBSL
Post author: Charles Couch