Mon. Dec 6th, 2021

A U.S. inflation measure closely monitored by the Federal Reserve last month posted its biggest year-on-year jump since the 1990s, contributing to pressure on President Joe Biden as his White House scrambled to tame rising costs.

The Commerce Department’s core index for personal consumption expenditure, which excludes volatile food and energy costs, rose 4.1 percent in October from a year ago.

The jump represents a significant increase from the annual increase of 3.7 percent in September, and was in line with consensus forecasts.

If energy and food prices are included, the PCE price index rose by 5 per cent compared to October 2020, faster than the 4.4 per cent rise in September. The data was released as part of a report that also showed that personal income increased by 0.5 percent in October compared to the previous month, while consumption increased by 1.3 percent.

The battle for high prices has since become a central focus for Biden’s economic team recent data showed that US consumer price growth jumped at the fastest pace in about three decades, which confused the hope that inflationary pressures would be short-lived.

This month, the Fed began shutting down its $ 120 billion monthly asset purchase program, with the intention of ending the stimulus completely next summer.

Inflation has accelerated this year along with a jump in wages, fueled by several rounds of stimulus controls and employers competing for new workers. Revenue rose 0.5 percent last month, after falling 1 percent in September.

The latest data comes as applications for U.S. unemployment benefits fell to their lowest weekly level in more than five decades on Wednesday, as submissions slowed en route to the Thanksgiving holiday and with businesses struggling to recruit staff amid labor shortages.

Last week, state unemployment offices received 199,000 initial unemployment claims on a seasonally adjusted basis, down from 270,000 the previous week, according to the Department of Labor. This brought unemployment claims to their lowest level since November 1969, compared to a previous low of 205,000 in February 2020.

Claims also fell more than economists expected, with an average estimate of 260,000 for the week.

“It’s fair to say we did not see it coming,” said Mark Hamrick, senior economic analyst at Bankrate.

“Americans are entering the heart of the holiday season with a reasonable expectation that an already tight labor market will continue to increase in the months ahead,” he added.

Some economists have warned against reading too much into the report, noting that last week’s unadjusted figure for initial claims rose by 18,000.

“The drastic drop in weekly unemployment claims smells of seasonal adjustment noise,” said Robert Frick, a corporate economist at Navy Federal Credit Union. “Especially with Covid-19 cases on the rise, a drop seven times the recent average seems highly unlikely.”

“This shift is due to the ‘expectation’ of the start of major seasonal layoffs in construction as cold weather begins to envelop the northern level of the country,” said Joshua Shapiro, U.S. chief economist at MFR. “With housing in great demand and the weather not yet turning, it did not happen, however.”

There were 2 million Americans actively collecting benefits as of November 13, among the 2.1 million ongoing claims recorded a week earlier. Continued claims remain above pre-pandemic levels of about 1.7 million.

Redundancies have slowed as employers struggle to hire staff and retain the workers they already have, with a record number of Americans resigning their jobs in a tight labor market.

Over the past four weeks, the U.S. has averaged about 252,000 initial claims per week, down from 345,000 in early October.

A separate report from the Census Bureau on Wednesday said new orders for durable goods such as cars and kitchen utensils fell by 0.5 percent in October from the previous month, as factories are still struggling with parts and labor shortages. Incomplete durable goods orders rose 0.2 percent in a sign of strong demand.

The U.S. economy expanded in the third quarter at an annualized rate of 2.1 percent, compared to an initial estimate of 2 percent, according to an update from the Bureau of Economic Analysis. The revised figure reaffirmed that growth slowed sharply during the quarter, offset by bottlenecks in the supply chain.

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