Jobless Claims Drop to New Pandemic Low with Steeper Growth in Producer Price Growth

The U.S. department of labor saw the lowest application for unemployment benefits since its peak in April 2020 and at its lowest since the start of the pandemic in the U.S.

Initial jobless claims count for the week ended on October 9 stood at 293,000 which is down by 33,000 from the prior week. This accounts for a 95% decrease from the start of its peak in April last year, implying given the labor shortage in the market employers are initiating tighter policies to retain employees.

The latest number are result of economic recovery with increase in consumer demand for goods and services resulting in gradual recovery in the labor market. The latest surge in virus did not marginally affect companies’ stance on hiring.

Producer price index a gauge to measure price paid to U.S. manufacturers increased 8.6% from a year earlier and 0.5% from a month earlier. Core PPI which excludes volatile food and energy prices rose 6.8% year-over-year and 0.2% month-over-month.

This marks the slowest growth in PPI for this year subject to lower costs of services particularly airfares given resurgence of delta variant.

Recent supply chain interruptions, fueling energy prices together with materials shortages had substantial upward pressure on production costs. Fuels attributed to the biggest price increase on the PPI number with an increase of 43.5% over the last year.

Producers generally passes on increased costs to the consumer end which justifies the consumer price index (CPI) numbers breaking forecasts. The market had two-sided view on yesterday’s CPI number with some market participants seeing this as an indicator for robust economic recovery while other argued inflation to stay for long. The emergence of flattening yield curve with tightening 5/30- year yield spread after the CPI numbers added to the market worry on as a recession signal.