Author: smarttalksucce

Consumer prices increased slightly more than expected in September as food and energy price rises offset declines in used cars, the Labor Department reported Wednesday.

The consumer price index for all items rose 0.4% for the month, compared with the 0.3% Dow Jones estimate. On a year-over-year basis, prices increased 5.4% versus the estimate for 5.3% and the highest since January 1991.

However, excluding volatile food and energy prices, the CPI increased 0.2% on the month and 4% year over year, against respective estimates for 0.3% and 4%.

Dow futures were slightly positive following the news but fell sharply through the morning, while government bond yields were mostly lower as investors gravitated toward safe-haven fied income.

Gasoline prices rose another 1.2% for the month, bringing the annual increase to 42.1%. Fuel oil shot up 3.9%, for a 42.6% year over year surge.

Food prices also showed notable gains for the month, with food at home rising 1.2%. Meat prices rose 3.3% just in September and increased 12.6% year over year.

“Food and energy are more variable, but that’s where the problem is,” said Bob Doll, chief investment officer at Crossmark Global Investments. “Hopefully, we start solving our supply shortage problem. But when the dust settles, inflation is not going back to zero to 2 [percent] where it was for the last decade.”

Used car prices, which have been at the center of much of the inflation pressures in recent months, fell 0.7% for the month, pulling the 12-month increase down to 24.4%. However, the continued rise in prices even with the drop in vehicle costs could lend credence to the notion that inflation is more persistent than policymakers think.

Airline fares tumbled 6.4% for the month after falling 9.1% in July.

Shelter prices, which make up about a third of the CPI, increased 0.4% for the month and are up 3.2% for the 12-month period. Owners’ equivalent rent or how much an owner of a property would have to pay to rent it, increased 0.4% as well, its largest monthly gain since June 2006.

“This might just be an overshoot after a couple of relatively modest increases, but we can’t rule out the idea that the fundamentals — rapid house price gains, more aggressive landlord pricing, low inventory, and faster wage growth — are pushing up the trend,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Apparel prices also declined 1.1% in September while transportation services dropped 0.5%. Both sectors have been rising consistently and still showed respective annual gains of 3.4% and 4.4%.

Federal Reserve officials have called the current inflation run “transitory,” and attribute it largely to supply chain and demand issues that they expect to subside in the months ahead.

However, that view has been receiving substantial pushback lately.

“This is one more data point to say, ‘Fed, your trying to convince us that inflation is transitory is just not believable,'” Doll said. “If you know anybody who doesn’t have to live somewhere, doesn’t eat any food and doesn’t use energy, then inflation is maybe not a particular problem. But come on.”

On Tuesday, the International Monetary Fund warned that the Fed and its global peers should be preparing contingency plans should inflation prove persistent. That would mean raising interest rates sooner than expected to control the price gains.

Later in the day, St. Louis Fed President James Bullard told CNBC that he thinks the Fed should be more aggressive in withdrawing its economic support, and in particular its monthly bond purchases, should inflation prove a problem and require rate hikes next year. Also on Tuesday, Atlanta Fed President Raphael Bostic said the factors that have pushed inflation higher “will not be brief.”

“Today’s number shouldn’t move the needle for the Fed,” said Seema Shah, chief investment strategist at Principal Global Investors. “Inflation has already surpassed its goal and, if anything, the higher-than-expected September CPI just reinforces the need to start tapering. November tapering, here we come.”

JPMorgan Chase CEO Jamie Dimon on Monday took the transitory side of the argument, saying that the current conditions will clear up and inflation won’t be a factor in 2022.

Workers left their jobs at a record pace in August, with bar and restaurant employees as well as retail staff quitting in droves, the Labor Department reported Tuesday.

Quits hit a new series high going back to December 2000, as 4.3 million workers left their jobs. The quits rate rose to 2.9%, an increase of 242,000 from the previous month, which saw a rate of 2.7%, according to the department’s Job Openings and Labor Turnover Survey. The rate, which is measured against total employment, is the highest in a data series that goes back to December 2000.

Quits have been seen historically as a level of confidence from workers who feel they are secure in finding employment elsewhere, though labor dynamics have changed during Covid-19 crisis. Workers have left their jobs because of health concerns and child care issues unique to the pandemic’s circumstances.

A total of 892,000 workers in the food service and accommodation industries left their jobs, while 721,000 retail workers departed along with 534,000 in health care and social assistance.

“As job openings and hires fell in August, the quits rate hit a new series high, surging along with the rise in Covid cases and likely growing concerns about working in the continuing pandemic,” said Elise Gould, senior economist at the Economic Policy Institute.

Covid cases have since been on the decline nationally, though some health care professionals worry about another rise during the colder months.

Job openings also declined sharply in August as hiring fell.

Employment vacancies fell to 10.44 million during the month, a drop of 659,000 from July’s upwardly revised 11.1 million, according to the department’s Job Openings and Labor Turnover Survey. Federal Reserve officials watch the JOLTS report closely for signs of slack in the labor market.

The total fell well short of market expectations for 10.96 million openings, according to FactSet.

“There is an enormous labor shortage in the country right now and it is not just because people are quitting or have child care problems, or can’t get to work due to the Delta variant,” wrote Chris Rupkey, chief economist at Fwdbonds. “The economy is strong as a bull, that is why there is a tremendous demand for labor.”

The job posting rate fell to 6.6% in August from 7% in July. That level was just 4.4% a year ago as the economy was still struggling to escape the Covid downturn.

Hires declined by 439,000 for a month in which nonfarm payrolls increased by 366,000. The hires rate fell to 4.3% from 4.6%, due largely to a plunge in leisure and hospitality. The sector, which took the hardest pandemic hit, saw hiring decline by 233,000, sending the rate down to 7.9% from 9.5% in July.

Government hiring also fell sharply during the month, down to 1.4% from 2.2%.

The JOLTS data runs a month behind the nonfarm payrolls report but still carries weight at the Fed. Central bank officials are mulling whether to begin pulling back the unprecedented policy help they provided during the pandemic, and are expected later this year to slow monthly bond purchases.

However, Fed officials have said they will not begin increasing interest rates until the labor market firms up.