Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
The consumer price index was 5.4% higher in July than a year ago, which matched June’s increase. CPI was 0.5% higher in July than the month before, which was in line with the consensus forecast. Energy and food prices were the driving force in overall CPI gain, with energy prices up 1.6% last month. Core inflation, which excludes energy and food prices, rose 4.3% from a year ago. While this was less than the headline number, it’s still a very strong increase. Just because the July inflation numbers were pretty much as expected, that doesn’t mean they are good news. Consumer prices are still increasing at their fastest pace since August 2008. And for those who say the numbers are inflated due to COVID-19-fueled price declines last year, CPI is now 5% higher than in February 2020! This surge in inflation is costing Americans a lot of money, as real average hourly earnings in July were 1.2% lower than a year ago. That means that the strong job market and rising wages are being negated by runaway inflation, a situation that doesn’t look like it will end any time soon. Two bits of data came out this week further proving how strong the job market is right now.
More Signs of a Strong Labor Market
Last week, the Labor Department announced that there were10.1 million jobs available on the last day of June, setting yet another record. Economists had expected 9.1 million openings, so this is a blow-away number. Companies are desperate for workers these days, and the July employment report proves that hiring is really starting to pick up after a lackluster few months. We found out recently that weekly jobless claims fell for a third straight week, to 375,000. The report also noted that continuing unemployment claims, which trail by one week, fell to yet another pandemic-era low at 2.87 million. The bottom line is: The labor market is booming, prices are rising, and it’s time for the Federal Reserve to do their job.