{"id":1567,"date":"2019-07-11T11:56:41","date_gmt":"2019-07-11T15:56:41","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1567"},"modified":"2019-07-11T11:56:41","modified_gmt":"2019-07-11T15:56:41","slug":"june-consumer-prices-real-earnings-and-weekly-jobless-claims","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1567","title":{"rendered":"June Consumer Prices, Real Earnings and Weekly Jobless Claims"},"content":{"rendered":"\n

KEY DATA:<\/strong> CPI: +0.1%; Over-Year:\n+1.6%; Ex-Food and Energy: +0.3%; Over-Year: +2.1%\/ Hourly Earnings: +0.2%;\nOver-Year: +1.5%\/ Claims: down 13,000<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe tight labor market is not causing wages\nto surge, so inflation remains lower than expected.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Yesterday Fed Chair Powell signaled that\nrates would be coming down, probably at the end of the month.  So we have almost three weeks to see if his\nfears about weak inflation and a slowing economy are founded.  On the inflation front, his worst concerns\nwere not matched by the June Consumer Price Index report.  Costs rose modestly<\/em><\/strong>, but that was\nlargely due to the more volatile food and energy components, which were flat or\ndown.  Excluding those elements, prices\nrose at the fastest pace in over a year. \nCosts of shelter and medical care, not surprisingly, are driving up the\nindex.<\/em><\/strong>  In June, though, the\nbiggest increases were in used vehicles and clothing.  I am not sure those two will play a major\nrole going forward.  <\/p>\n\n\n\n

The number of new claims for unemployment insurance\nfell sharply last week <\/em><\/strong>and you would think that move signals further tightening in the labor\nmarket.  It probably does, but that\ndoesn\u2019t seem to be doing much for wages. \nHourly wages, adjusted for inflation, rose moderately in June.  Over the year, they have increased by a pace,\n1.5%, that can hardly be described as strong.<\/em><\/strong>  And if the Fed gets inflation to accelerate,\nspending power could rise even less.      <\/em><\/strong><\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  Yesterday,\nMr. Powell sent clear signs that he was worried about the economy and would be\nwilling to lower interest rates. \nUnfortunately, his logic is flawed. \nA major concern is trade, which is slowing world growth.<\/em><\/strong>  Under normal circumstances, lower interest\nrates might be expected to increase growth, but that doesn\u2019t seem likely right\nnow.<\/em><\/strong>  First, cutting rates would not change\nthe factors that are harming world growth. \nThey are tariffs and the fears of a further expansion in the trade war\nwith China.  Lowering rates does not\nchange those concerns or reduce the costs of tariffs. So, why would businesses\nchange their investment or expansion plans? \nGot me.<\/em><\/strong>  Meanwhile, the\ninterest sensitive sectors, such as housing and vehicles, are not likely to be helped\nmuch by a quarter or half point cut. \nRates are already low and it isn\u2019t the cost of funds that are\nrestraining the markets.<\/em><\/strong> So what the Fed Chair expects to accomplish\nis beyond me.<\/em><\/strong>  But he\npersists.  On the inflation front, the\nConsumer Price Index, which is not the favored inflation measure but one that\nis watched nonetheless, is not showing major problems.  Other, less volatile measures created by the\nCleveland and Atlanta Fed Banks show inflation at an even higher rate.<\/em><\/strong>  But he persists.  I am guessing that Mr. Powell is counting on\na sub-2% second quarter GDP growth rate to bolster his position.  And that is quite possible.  But one thing we know about GDP reports, they\noften surprise.  So, what does he do if a\n2.5% growth rate prints?  That would\nhardly argue that the economy is currently being greatly affected by the trade\nissues.  The Fed Chair is on shaky grounds\nand while we are likely to get a rate cut at the end of the month, it would be\nnice if Fed policy was not being based so much on guesses and issues, such as\ntrade policy, that monetary policy cannot influence. <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: CPI: +0.1%; Over-Year: +1.6%; Ex-Food and Energy: +0.3%; Over-Year: +2.1%\/ Hourly Earnings: +0.2%; Over-Year: +1.5%\/ Claims: down 13,000 IN A NUTSHELL:  \u201cThe tight labor market is not causing wages to surge, so inflation remains lower than expected.\u201d WHAT IT MEANS:  Yesterday Fed Chair Powell signaled that rates would be coming down, probably at … Continue reading June Consumer Prices, Real Earnings and Weekly Jobless Claims<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1567","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1567","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1567"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1567\/revisions"}],"predecessor-version":[{"id":1568,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1567\/revisions\/1568"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1567"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1567"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1567"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}