Unemployment claims down, inflation up. Labor shortage and supply chain disruptions continue to stall recovery.

A mix of recent news reveals the ongoing pressure on the national and state economic recovery. 

Nationally, unemployment claims filings are down to the lowest level since spring 2020. (The state Employment Security Department is shifting to monthly claims releases. The weekly data are available on the ESD website.)

In the week ending October 9, the advance figure for seasonally adjusted initial claims was 293,000, a decrease of 36,000 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 3,000 from 326,000 to 329,000. The 4-week moving average was 334,250, a decrease of 10,500 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 750 from 344,000 to 344,750.

The advance seasonally adjusted insured unemployment rate was 1.9 percent for the week ending October 2, a decrease of 0.1 percentage point from the previous week’s unrevised rate.

That low unemployment rate, remember, is partially (largely?) attributable to the many workers and potential workers who are no longer in the labor market. The Associated Press reports,

Unemployment claims dropped 36,000 to 293,000 last week, the second straight drop, the Labor Department said Thursday. That’s the smallest number of people to apply for benefits since the week of March 14, 2020, when the pandemic intensified, and the first time claims have dipped below 300,000. Applications for jobless aid, which generally track the pace of layoffs, have fallen steadily since last spring as many businesses, struggling to fill jobs, have held onto their workers.

The decline in layoffs comes amid an otherwise unusual job market. Hiring has slowed in the past two months, even as companies and other employers have posted a near-record number of open jobs. Businesses are struggling to find workers as about three million people who lost jobs and stopped looking for work since the pandemic have yet to resume their job searches. Economists hoped more people would find work in September as schools reopened, easing child care constraints, and enhanced unemployment aid ended nationwide.

The AP notes wages are up.

Average hourly pay rose at a healthy 4.6% in September from a year earlier, and for restaurant workers wage gains in the past year have topped 10%.

The Wall Street Journal, in a good paywall-protected story, also writes on the labor shortage and points out the inflation connection to rising wages, as well as the supply-chain problems.

Companies are holding on tightly to employees at a time when few other workers are available and prices are rising in wholesale markets facing supply constraints, both factors contributing to higher inflation.

Shortages of materials are driving up the cost of goods, while the tight labor market is pushing up wages.

And, yes, the producer price index is up today.

The Producer Price Index for final demand increased 0.5 percent in September, seasonally
adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.7
percent in August and 1.0 percent in July. (See table A.) On an unadjusted basis, the final
demand index rose 8.6 percent for the 12 months ended in September, the largest advance since
12-month data were first calculated in November 2010.

Nearly 80 percent of the September increase in the index for final demand can be traced to a 1.3-percent rise in prices for final demand goods. The index for final demand services moved up 0.2 percent.

Prices for final demand less foods, energy, and trade services moved up 0.1 percent in September after increasing 0.3 percent in August. For the 12 months ended in September, the index for final demand less foods, energy, and trade services rose 5.9 percent.

The AP writes,

Economists said that the jump in wholesale and retail prices reflected impacts of the pandemic as strong demand is running up against supply chain problems.

“The demand impact will fade further over coming months,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “But there is a risk of more persistent headwinds from broken supply chains that could keep goods prices and inflation high for longer than expected.”

Yesterday, we saw another increase in the consumer price index

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in
September on a seasonally adjusted basis after rising 0.3 percent in August, the
U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all
items index increased 5.4 percent before seasonal adjustment.

The indexes for food and shelter rose in September and together contributed more
than half of the monthly all items seasonally adjusted increase. The index for
food rose 0.9 percent, with the index for food at home increasing 1.2 percent.
The energy index increased 1.3 percent, with the gasoline index rising
1.2 percent.

As the AP reports, these increases are not trivial.

Another jump in consumer prices in September sent inflation up 5.4% from where it was a year ago, matching the largest increase since 2008 as tangled global supply lines continue to create havoc.

U.S. consumer prices rose 0.4% in September from August as the costs of new cars, food, gas, and restaurant meals all jumped.

The annual increase in the consumer price index matched readings in June and July as the highest in 13 years, the Labor Department said Wednesday. Excluding the volatile food and energy categories, core inflation rose 0.2% in September and 4% compared with a year ago. Core prices hit a three-decade high of 4.5% in June.

Challenging weeks ahead.