First the good news: The Department of Labor reports just 360,000 unemployment claims were filed last week, another new low in the pandemic era.
In the week ending July 10, the advance figure for seasonally adjusted initial claims was 360,000, a decrease of 26,000 from the previous week’s revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000. The previous week’s level was revised up by 13,000 from 373,000 to 386,000. The 4-week moving average was 382,500, a decrease of 14,500 from the previous week’s revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week’s average was revised up by 2,500 from 394,500 to 397,000.
The advance seasonally adjusted insured unemployment rate was 2.4 percent for the week ending July 3, unchanged from the previous week’s unrevised rate.
The Associated Press reports the upbeat story.
The number of Americans applying for unemployment benefits has reached its lowest level since the pandemic struck last year, further evidence that the U.S. economy and job market are quickly rebounding from the pandemic recession.
Thursday’s report from the Labor Department showed that jobless claims fell by 26,000 last week to 360,000. The weekly tally, a proxy for layoffs, has fallen more or less steadily since topping 900,000 in early January.
The U.S. recovery from the recession is proceeding so quickly that many forecasters have predicted that the economy will expand this year by roughly 7%. That would be the most robust calendar-year growth since 1984.
More at the link.
Yet, while we’re in the silver lining camp on most things, we still have reservations about inflation’s impact on the recovery, as we wrote earlier. Yesterday, Fed chair Jerome Powell said he expected inflation to continue to escalate, but eventually be tamed.
Federal Reserve Chair Jerome Powell says that inflation “will likely remain elevated in coming months” before “moderating,” an apparent acknowledgement that price gains have been larger and more persistent than many economists forecast.
In written testimony to be delivered Wednesday at noon before the House Financial Services Committee, Powell reiterated his long-held view that the high inflation readings over the past several months have largely been driven by temporary factors, such as supply shortages and surging demand, as pandemic-related business restrictions ease.
Yet Powell did not repeat an assertion he made just three weeks ago before another House panel, that as the trends pushing prices higher faded, inflation would “drop back” to the Fed’s goal of 2%.
Adding to our concern is the report that wholesale inflation climbed by a record level over the last year.
Inflation at the wholesale level jumped 1% in June, pushing price gains over the past 12 months up by a record 7.3%.
The Labor Department reported Wednesday that the June increase in its producer price index, which measures inflation pressures before they reach consumers, followed a gain of 0.8% in May and was the largest one-month increase since a 1.2% rise in January.
For the 12 months ending in June, wholesale prices are up 7.3%, the largest 12-month increase since the government began the current series on wholesale prices in 2010.
The news on wholesale prices followed a report Tuesday that consumer prices increased in June by 0.9% and were up 5.4% over the past 12 months, the biggest 12-month gain in 13 years.
And then there’s government debt.
The pandemic has pushed global government debt to the highest level since World War II, surpassing the world’s annual economic output. Governments, especially in rich countries, are borrowing still more, partly to erase the damage of Covid-19.
Advocates say the spending, also encouraged by new economic thinking about debt, could usher in a period of robust global growth, reversing the malaise many wealthy countries have felt this century. But if those theories are off-base, the world could be saddled with debts that can be absorbed only via inflation, high taxes or even default.
Either way, the combination of huge debt and markets’ lack of concern is unprecedented. The U.S. government is on course for a budget deficit of $3 trillion for the second year in a row. Despite that and fears of inflation, 10-year Treasury bonds are yielding only around 1.33%, partly because of the Federal Reserve’s caution about raising its interest rates.
Celebrate the good news, which abounds, but we should also recognize that conditions are such that things could easily change. Taking recovery and prosperity for granted is always a mistake.