Dive Brief:<\/p>\n
Inflation sped up last month to the fastest pace this year, the Bureau of Labor Statistics said Thursday, as fresh data highlighted a slowdown in the job market and underscored the risks confronting the Federal Reserve as it leans toward stimulating the economy next week by cutting the main interest rate. Dive Insight:<\/p>\n The CPI data showed that the highest U.S. tariffs since the 1930s are pushing up prices at a faster pace across the economy.<\/p>\n A 0.3% gain last month in the cost of new vehicles, 1% increase for used cars and trucks, and 0.5% rise in prices for both apparel and video and audio products underscored the inflationary impact from import duties.<\/p>\n Prices also increased for politically touchy categories of goods and services that confront consumers on a daily basis.<\/p>\n Shelter, food and gasoline costs rose in August by 0.4%, 0.5% and 1.9%, respectively. The swelling cost of shelter was the biggest impulse behind the monthly gain in headline CPI, the BLS said.<\/p>\n \u201cTariffs are indeed raising the prices of imported goods, and also for some services that rely on supply chains, and that\u2019s going to weigh on the economy,\u201d Conference Board Chief Economist Dana Peterson said Wednesday.<\/p>\n \u201cConsumers are going to spend less, and that\u2019s going to convince businesses to not really invest much \u2014 they may even start letting people go \u2014 and so that\u2019s where the weakness is,\u201d Peterson said during a webcast.<\/p>\n Even as inflation persists above their 2% target, Fed Chair Jerome Powell and other policymakers in recent weeks have voiced concern about the cooling labor market. They have focused more in public comments on their congressional mandate to achieve full employment, reinforcing expectations of easing at their meeting next week.<\/p>\n Some economists say the immediate priority of policymakers should be employment rather than ensuring price stability, the other half of the Fed\u2019s dual mandate from Congress.<\/p>\n \u201cWith the U.S. CPI numbers matching the consensus forecasts, the main market mover this morning is jobless claims, which came in far higher than expected,\u201d Mohamed El-Erian, chief economic advisor at Allianz,\u00a0said in a post<\/a> on X.<\/p>\n \u201cThe overall signal from this week\u2019s data is clear, and one I\u2019ve stressed for some time, now increasingly echoed by others,\u201d he said. \u201cInflation may still sit above the Fed\u2019s target, but the greater risk to the economy lies in the pace and severity of labor market weakening.\u201d<\/p>\n The four-week moving average of jobless claims last week increased to 240,500, the highest level since June, the Labor Department said.<\/p>\n The data followed a record revision of job growth during the 12 months through March. Payroll growth will probably be slashed by 911,000<\/a>, or 0.6%, according to a BLS preliminary report released Tuesday.<\/p>\n In addition, overall U.S. hiring fell last month across the economy, and unemployment rose to 4.3%, the Labor Department said Friday.<\/p>\n
\nThe Consumer Price Index rose 0.4% in August<\/a> \u2014 2.9% on an annual basis \u2014 after a 0.2% monthly gain in July, the BLS said. So-called core CPI, which excludes volatile food and energy prices, increased 3.1% on a 12-month basis. Meanwhile, 263,000 people filed for jobless benefits last week, the highest number since October 2021<\/a>.\u00a0
\n\u201cWe are still not convinced that the economy needs to be stimulated by the Fed\u201d at the end of a two-day meeting on Sept. 17, Ed Yardeni, president of Yardeni Research, said Thursday in a report. He noted that the economy is growing, inflation exceeds the central bank\u2019s 2% goal and the unemployment rate is ranging at a comparatively low level.<\/p>\n