Current Inflation Index Reports and Fed Policy/Actions

[G-Money]

Ok, so back to discussion of rising inflation. "High petroleum prices" have persisted for two months. I think that gets priced into the economy and growth sooner than 1 year. While the conflict may end before then, high energy prices are likely to persist. No rate cuts in the foreseeable future.

If my understanding of the sentiment here is correct, we can't point to declining growth in GDP and jobs until those numbers actually become negative, and only then can we say those things are attributed to current economic realities?

 

[GenXguy]

I asked google what you wrote: Is there overriding trend in the economy right now?

This is the answer: (Stagflation is in bold)

[mod edit to comply with forum AI content policy

Yeah, and whatever we call it, it's a rotten economy, and I think it's going downhill from there.

 

[Montecfo]

It's not personal. But there appears to be a reluctance to describe what "this" is. It does have flavors of stagflation, even if calling it absolutely stagflation isn't quite accurate. Why isn't that acknowledged?

Lots of forces pushing in different directions is one way to describe it. So, chaos? No clear direction? Uncertainty?

In my opinion, there is really no point in trying to "label" our economy in this way especially since it does not really fit the widely understood definition of stagflation and "stagflation-lite" has no accepted meaning.

We could use a lot of made up terms to describe it I guess and we each could pick our own favorite and argue about them. Each would reflect I think our personal levels of optimism or pessimism or bias. That is not really the goal of this thread as I see it, although I am all for free exchange of ideas.

This thread is about Inflation and Fed policy and actions. It has functioned very well as just that. Discussion of economic reports tied to or likely to influence Fed actions are right in our strike zone.

When we deviate from that it can become a mess.

Respectfully, let's not do that.

 

[MichaelB]

Meanwhile back in the real world of the actual economy, jobless claims came in at 207k, less than expected and down from 218k the prior work.

Continuing claims ticked up a bit but in line with forecasts.

Both hiring and firing remain muted.

https://www.wric.com/business/us-world-business/ap-us-jobless-claims-fall-last-week-as-layoffs-remain-low-despite-global-economic-uncertainty/

Getting back on topic, no disagreement with your conclusion, but I think this is not new data, just a release of data already released, but with analysis.

 

[MichaelB]

I asked google what you wrote: Is there overriding trend in the economy right now?

This is the answer: (Stagflation is in bold

And here is Gemini AI engine:

Much as I’d like to address the AI comments, I won’t for 2 reasons. First, as I’ve stated already, this thread has another objective and as a forum member I’m interested in keeping it on topic. Second, there’s a forum policy that discourages AI posts, so it’s best just not to engage.

I would suggest you summarize the AI response and post it in the stagflation thread.

 

[Montecfo]

Getting back on topic, no disagreement with your conclusion, but I think this is not new data, just a release of data already released, but with analysis.

It is for the previous week, but released today as usual. If it was posted earlier today then I missed it.

 

[pb4uski]

Big pop in food and energy. Was a particularly cold winter in the east so I suspect NG and heating oil were a factor. This is before Iran so .... Also, PPI doesn't include imports per se (although opportunistic expansion of margins caused by tariffs can be a factor).

I blew through the gallons in my propane contract by a little this heating season and I rarely hit the limit. I was pleasantly surprised that the additional gallons at the spot price were only $2.30.. my contract was $1.99.

 

[MichaelB]

It is for the previous week, but released today as usual. If it was posted earlier today then I missed it.

Jobless claims are indeed positive and point to a falling unemployment rate. They are a leading indicator and not what one would expect with a weakening economy.

 

[G-Money]

Also mentioned above, the labor participation rate fell recently to its lowest level since 2021. It's described as a structural decline; aging population, and changes in policy.

 

[Montecfo]

Also mentioned above, the labor participation rate fell recently to its lowest level since 2021. It's described as a structural decline; aging population, and changes in policy.

Yes. That is expected to continue until middle of next decade. This is another reason we may not need historical baseline new job creation to stay at virtually full employment.

 

[JoeWras]

I blew through the gallons in my propane contract by a little this heating season and I rarely hit the limit. I was pleasantly surprised that the additional gallons at the spot price were only $2.30.. my contract was $1.99.

There is a surplus of gas. I.E. gas as in not petrol or liquid, but gaseous, of all forms. My city has has CNG busses. We might need more of that. Some of the gas is from wastewater sewage off-gassing processing.

Otherwise, this stuff is just burned or let off into the atmosphere, so that doesn't help the atmosphere situation. (To be fair some of it is reinjected underground, but it is easier to use it.)

 

[G-Money]

Yes. That is expected to continue until middle of next decade. This is another reason we may not need historical baseline new job creation to stay at virtually full employment.

It's another reason the economy is structurally weakening, IMO, and another headwind to GDP growth.

 

[Onda]

Jobless claims are indeed positive and point to a falling unemployment rate. They are a leading indicator and not what one would expect with a weakening economy.

Initial claims dropped by 11,000 but continuing claims rose from 1.787 million to 1.818 million, an increase of 31,000 people.
Suggesting finding job is getting harder.

 

[Montecfo]

Initial claims dropped by 11,000 but continuing claims rose from 1.787 million to 1.818 million, an increase of 31,000 people.
Suggesting finding job is getting harder.

Continuing claims are lower than the same period 6 months ago and a year ago suggesting slowly improving labor market conditions.

But yes if continuing claims jumped over a sustained period I think the Fed would probably want to cut rates.

 

[explanade]

I am puzzled by the oil prices where the price of gas is as high as it is here in the USA at the pump. Sure the strait is blocked an had been moving 20% of oil production, but none or near-none of it affected oil used here in the USA. Unlike the 70's, there's no shortage of oil/gasoline here either. No stations with 'out of gas' signs, odd/even license plate days, limits of 10 gallons, lines wrapped around the block, etc.
I've been reading that the region is rerouting the oil through other channels than the strait as well, and while that might be a slower process, it is a method to get production back to the markets. I suppose when that comes to fruition, the strait will no longer be of value for oil delivery?
I'm not sure this is on-topic, but it is based on questions that come to mind from reading the thread, so in my mind, it is.

Some Asian countries are rationing or introducing measures to limit consumption of fuels.

Arguably, nowhere has felt it more than Asia: nearly 90% of the oil and gas passing through the strait is bound for Asian countries.

And already, the strain is being felt.


Governments have ordered employees to work from home, cut the working week, declared national holidays and closed universities early in order to conserve their supplies.

How the Iran war impacts you if you live in Asia

Asia relies heavily on oil and gas from the Gulf, and shortages and higher prices are starting to bite.

www.bbc.com

 

[explanade]

Some of these numbers make me laugh. Food and Energy is kinda important for everyday Americans. Food especially.

There are expected to be downstream effects. Urea and fertilizer supply chains are impacted and could result in reduced harvests months or a year from now.

There's also helium, which is used in semiconductor manufacturing. Remember the chip shortages in 2021-22, leading to shortages of new cars which also caused old car prices to rise as well?

 

[SnowballCamper]

Not sure if someone already shared this, but for those that want to nerd out with a slider bar (or nine of them) on fed policy, here you go

Policy Calibration Tool - San Francisco Fed

This data series is part of the Center for Monetary Research.

www.frbsf.org

 

[MichaelB]

Some Asian countries are rationing or introducing measures to limit consumption of fuels.

How the Iran war impacts you if you live in Asia

Asia relies heavily on oil and gas from the Gulf, and shortages and higher prices are starting to bite.

www.bbc.com

There are expected to be downstream effects. Urea and fertilizer supply chains are impacted and could result in reduced harvests months or a year from now.

There's also helium, which is used in semiconductor manufacturing. Remember the chip shortages in 2021-22, leading to shortages of new cars which also caused old car prices to rise as well?

These are real issues and people will suffer. More likely, the US and EU will see some short term impact in price, but we are wealthier societies and can afford higher prices over the short term.

If prices remain elevated for more than that, things do get worse for everyone.

 

[MichaelB]

Employment data release this week is positive. New unemployment claims were 200k, a slight increase, but still a historically low number. Release here

The JOLTS (job openings and labor turnover) report showed continued low levels of turnover, also positive. Release here

Expectations for employment have been consistently a bit negative while actual employment numbers have been consistently a bit positive. No doubt this contributes to the Fed holding rates steady.

 

[Montecfo]

Also the ADP private employment report came out. Private employment grew by 109k which was largest boost since January 2025.

ADP National Employment Report: Private Sector Employment Increased by 109,000 Jobs in April; Annual Pay was Up 4.4%

/PRNewswire/ -- Private sector employment increased by 109,000 jobs in April and pay was up 4.4 percent year-over-year according to the April ADP National...

www.prnewswire.com

Q1 GDP was estimated at 2.0% real, a solid performance and a rebound from 0.5% in Q4.

Gross Domestic Product | U.S. Bureau of Economic Analysis (BEA)

www.bea.gov

The Fed kept rates flat as expected. Markets are now expecting the Fed funds rate to remain flat the rest of the year.

This seems about right considering the solid economy and with the inflation spike viewed as event driven for now.

 

[Koolau]

Better than we were expecting. Maybe not great, but much better than it could have been with oil being in flux. Status Quo at the Fed isn't unexpected either and markets seem quite happy.

I may just BTD this summer. Thinking the kids could each use a nice check.

 

[Chuckanut]

Inflation is still a headache, IMO. I just don't see us comfortably in the mid 2% area for years. I have seen no sign of spending restraint at the Federal level.

 

[Fermion]

Inflation is still a headache, IMO. I just don't see us comfortably in the mid 2% area for years. I have seen no sign of spending restraint at the Federal level.

Federal spending isn't really what causes inflation though is it? Cheap interest rates and scarcity of goods does for sure. How much would memory be and how many data centers would be being built right now if interest rates were 10%?

 

[Koolau]

Federal spending isn't really what causes inflation though is it? Cheap interest rates and scarcity of goods does for sure. How much would memory be and how many data centers would be being built right now if interest rates were 10%?

The theory is that there are too many dollars chasing too few goods is the simple definition of inflation. Where do dollars come from?

Not my area of expertise so YMMV.

 

[Montecfo]

The US Treasury is spending $2T or so each year in excess of tax receipts. Yes, that is a driver of inflation. In fact our above trend inflation was triggered by the post-covid deficit spending which was largely adding to people's already robust bank accounts. That creates demand.

And that debt issue is far more concerning than high gas prices etc. The reason is it is an existential threat to the lifestyle of all Americans, unless Modern Monetary Theory is correct lol.

I hope the Fed will jawbone about that more effectively. And hope voters will make clear this must be fixed.