EconMatters: The labor market is really starting to tighten and Thursday`s initial jobless claims coming in at 297,000 for the May 10 week is the lowest reading since May 2007. In several of the economic reports this week, increased strength in the labor components also suggest increased hiring in the manufacturing sector in the Empire State Manufacturing Survey coming in at a whopping 19.01.
This follows the strongest employment report since the financial crisis where the economy added 288,000 jobs bringing the unemployment rate down to 6.3%, with upward revisions for the previous two months as well. So the jobs market is trending higher, and this is the best run of job creation since the financial crisis.
The PPI and CPI reports this week also showed us that inflation is really starting to stoke in the economy for the first time since the financial crisis where it is actually showing up in the data the Fed tracks. The PPI up 0.6 percent in April, following a 0.5 percent boost in March with the CPI coming in at 0.3 percent rise for April while previously rising 0.2 percent in March. Expect the PPI to start bleeding into the CPI in the coming months, and are we finally coming to that moment where inflation that everybody recognizes starts showing up in ‘undeniable bluntness’ that finally captures the attention of Wall Street and the Federal Reserve by showing itself even in the artificially watered down metrics used to track inflation by the US Government?
Inflation Inflection Point
We all experience inflation in our everyday lives, and obviously it is being downplayed by Central Banks wanting to inflate the monetary base, and thus monetize the debt by making its significance less in relative terms. But are we finally coming to that point in Great Britain and the United States where inflation really starts to take off and get out of hand? I think once these minimum wage initiatives get implemented this is where wage inflation and price increases really start taking off, and we are in store for some shocking PPI and CPI reports over the next year.
I think this is the one area where markets and the Federal Reserve are really asleep at the wheel, under the radar we are starting to see some forces come together to finally make a reality – the inflation problem of being behind the curve in tightening mode that we all feared would show up one day. By the time the Fed realizes inflation is a problem it is too late, and because it has failed to rear its ugly head for five years on loose monetary policy, the complacency factor is huge right now in the financial community.