Facebook<\/p>\n
Tweet<\/p>\n
<\/p>\n Email Link<\/p>\n \n The cost of living continues to increase for Americans at a time when the job market appears to be on shakier footing, creating a complicated economic problem that could be tricky to solve.\n <\/p>\n \n Consumer prices rose 0.4% in August, driving the annual inflation rate to 2.9%, the highest since January, according to Bureau of Labor Statistics data released Thursday. The reading marked an acceleration from the 2.7% increase seen in July,<\/a> with price hikes driving up the cost of Americans\u2019 most basic needs.\n <\/p>\n \n Grocery and fuel prices shot higher in August after falling the month before. Food at home prices rose 0.6% \u2014 the highest monthly jump in nearly three years \u2014 and gas prices climbed by 1.9% after falling 2.2% the month before.\n <\/p>\n \n The latest Consumer Price Index provided further evidence that some costs from President Donald Trump\u2019s policies, such as sweeping immigration reform and steep tariffs, are slowly being passed along to consumers, economist Dean Baker, co-founder of the Center for Economic and Policy Research, told CNN on Thursday.\n <\/p>\n \n \u201cFresh fruits and vegetables up 2% in one month, it is striking,\u201d Baker said. \u201cThis is mass deportations and tariffs.\u201d\n <\/p>\n \n \u201cA lot of the crops are rotting in the fields because (producers) don\u2019t have the crew to pick them. That certainly can be associated with mass deportations; they don\u2019t have the workers they need.\u201d\n <\/p>\n \n While there are general factors in addition to policies that influence food costs (including demand, climate, weather and global matters), prices are going up at a time when the US job market has shifted into a lower gear.\n <\/p>\n \n Paychecks also aren\u2019t going as far as they used to: Real (inflation-adjusted) hourly earnings slowed to 0.7% in August, the lowest gain in more than a year, BLS data shows.\n <\/p>\n \n \u201cThe consumer aspects of this are actually more problematic politically than the tariff aspects are right now for the administration,\u201d Tyler Schipper, associate professor in economics and data analysis at the University of St. Thomas in St. Paul, Minnesota. \u201cEven if real earnings are up, consumers don\u2019t perceive it that way, and this report indicates that things at the grocery store are still getting more expensive.\u201d\n <\/p>\n \n \u201cAnd that\u2019s just going to harden those beliefs that their economic worlds aren\u2019t getting better,\u201d he added.\n <\/p>\n \n Stocks moved higher Thursday morning, with the Dow rising 528 points, or 1.16%, to trade above 46,000 points for the first time. The broader S&P 500 gained 0.7% and the tech-heavy Nasdaq Composite rose 0.6%. Traders continue to price in an 89% chance the Federal Reserve cuts its benchmark interest rate by a quarter point at its policy meeting next week, with an 11% chance of a jumbo half-point cut.\n <\/p>\n \n \u201cThe latest inflation data does support the notion that inflation is reaccelerating, but at a gradual pace,\u201d Preston Caldwell, chief US economist at Morningstar, wrote Thursday in a note. \u201cIt won\u2019t stop the Fed from cutting next week.\u201d\n <\/p>\n Economic warning signs and a looming rate cut<\/p>\n \n The latest labor market data, including sluggish job creation in August and job losses this summer, shows that the foundation for the US economy is starting to show more cracks.\n <\/p>\n \n Still, the unemployment rate has remained within a historically healthy range, an indication that the weakness in the job market is more of a sign of slowing labor supply (retirements and immigration) running alongside slower demand. Layoffs, a concerning indicator of a potential downturn, haven\u2019t yet accelerated.\n <\/p>\n \n However, the unemployment rate moved slightly higher in August, and new data on Thursday showed one of the biggest weekly increases in jobless claims seen in more than a year: First-time filings for unemployment insurance \u2014 considered a proxy for layoffs \u2014 jumped by 27,000 to 263,000 for the week ending September 6. That\u2019s the highest level seen since late-October 2021, Department of Labor data showed Thursday.\n <\/p>\n \n A rate cut from the Fed, even by a small amount, could be enough to shore up some confidence in businesses and keep a floor under the labor market and elsewhere, economists told CNN last week.\n <\/p>\n \n But the extent to which a quarter-point cut brings relief to Americans watching prices go up remains to be seen.\n <\/p>\n \n \u201cIt\u2019s pretty clear that the labor market has shifted into a lower gear,\u201d Schipper said. \u201cBut what consumers are hearing is, \u2018my job is at risk, and grocery store prices are still accelerating.\u2019 And I don\u2019t know that a headline Wednesday next week that the Fed cuts interest rates by (a quarter-point) is really going to be the salve that makes the problem go away.\u201d\n <\/p>\n \n The Fed, which has a dual mandate of full employment and price stability, has a tough choice to make if inflation continues to rise, CEPR\u2019s Baker said. Central bankers, notably Fed Chair Jerome Powell, also have been under increasing pressure from Trump to slash rates.\n <\/p>\n \n \u201cFor all of Trump\u2019s (comments), I don\u2019t know if a half-point would be better in the sense that I think it would send a panic signal into the market,\u201d Baker said. \u201cAnd for people\u2019s living standards, (inflation) is bad news. Electricity prices are up 0.2 of a percent, 6.2% year over year. When you see Trump clamping down on wind and solar and we know AI is eating up electricity left and right, we aren\u2019t pursuing anti-inflation policies at all \u2013 kind of the opposite \u2013 and that can\u2019t be good news.\u201d\n <\/p>\n \n The housing-related shelter category, which is the heaviest-weighted in the CPI, was the leading contributor of August\u2019s monthly increase; however, on an annual basis, shelter inflation continued to slow from pandemic-era highs to 3.6%, its lowest rate in nearly four years.\n <\/p>\n \n Excluding food and energy, which tend to be volatile categories, the closely watched core CPI index rose 0.3% on a monthly basis (a slight acceleration in pace) but held steady at 3.1% for the 12 months ended in August.\n <\/p>\n \n Trump\u2019s sweeping trade policy of tacking steep tariffs on most goods that cross America\u2019s borders are widely expected to result in higher prices for businesses and consumers \u2013 although at a gradual pace and not to the extent seen in 2022 and other high-inflationary periods.\n <\/p>\n \n There are myriad factors<\/a> as to why prices haven\u2019t risen quickly and sharply: Businesses loaded up their warehouses with pre-tariffed goods; higher costs have been eaten in part by entities along the supply chain, lessening the blow at the retail store; Trump\u2019s fits-and-starts approach to tariffs has meant that the bulk of them did not go into effect for months; and businesses have held off on decisions (such as hiking prices) because of policy-related uncertainty.\n <\/p>\n \n \u201cIt appears possible that some firms were either hoping that the August trade deals might result in lower tariff rates, or the courts might strike down some of the tariffs,\u201d Michael Hanson, JPMorgan economist, wrote in a note Thursday to investors. \u201cThe former did not happen, and we continue to expect the administration to find ways around the latter if it were to happen to maintain the current elevated level of the effective tariff rate. As such, we continue to anticipate additional firming of consumer inflation readings in coming months.\u201d\n <\/p>\n \n Economists were expecting the pace of price hikes to heat up in August as a wider swath of businesses passed along higher costs from President Donald Trump\u2019s expansive tariffs.\n <\/p>\n \n FactSet estimates were for a 0.3% monthly gain and a 2.9% annual increase.\n <\/p>\n \n Economists have been watching the \u201ccore goods\u201d category like hawks for signs of tariff-related cost pass-throughs to consumers. In August, as in months before, there are clear indications that prices \u2014 particularly for items that are not widely produced domestically \u2014 are on the rise.\n <\/p>\n \n The core goods category (which excludes food and energy) rose 0.3% in August, its highest pace in seven months, driven higher by a long-anticipated increase in new car prices. Overall goods prices are showing a slow and steady incline after having fallen for much of the past two years in an unwind from the pandemic nesting boom.\n <\/p>\n \n Prices of pharmaceuticals, which are exempted from tariffs for now, fell 0.3% on a monthly basis; however, durable goods excluding vehicles rose 0.5% in August and are running at an 8.5% annualized pace in the past three months, Morningstar\u2019s Caldwell noted.\n <\/p>\n \n \u201cThis is much higher than normal (deflation of 1%-2% is normal for this category),\u201d he wrote. \u201cThis is clearly showing the impact of tariffs.\u201d\n <\/p>\n \n Some of the categories seeing the biggest monthly price leaps in August are those heavily imported and highly exposed to tariffs: Sewing machines, fabric and supplies<\/a> (+9.1%); jewelry (+6.8%); women\u2019s outerwear<\/a> (+4.4%); instant coffee<\/a> (+4.9%); tomatoes<\/a> (+4.5); beverage materials including coffee and tea (+2.8%); bananas <\/a>(+2.1%).\n <\/p>\n \n On the services side, those were lifted by a spike in airfare prices, which have moved higher after demand fell off due to economic and air safety uncertainty. Excluding airfares and shelter, core services inflation was roughly flat.\n <\/p>\n","protected":false},"excerpt":{"rendered":"Facebook Tweet Email Link The cost of living continues to increase for Americans at a time when the…\n","protected":false},"author":2,"featured_media":167632,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,63,99,171],"class_list":["post-167631","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-au","tag-australia","tag-business","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/167631","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=167631"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/167631\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/167632"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=167631"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=167631"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=167631"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n <\/a><\/p>\n