Inflation Sticks, Yields Jump

September labor department data elevates long-term inflation expectations alongside contradictory jobless claims trends

October 10, 2024 • Est. Reading Time: 4 minutes

Mobius Intel Brief:

Thursday’s consumer price index (CPI) and weekly jobless claims data showed contradictory signals for the Federal Reserve’s two-part mandate of price stability and maximum employment.

  • Key Intel: The Fed’s preferred “core” CPI (stripped of food/energy) gained to an annualized 3.3% in September from 3.2% in August. Meanwhile, weekly initial jobless claims jumped 14.7% W/W to 258K — the highest since August 2023.

  • As noted on recent Intel Briefs, September’s sticky inflation retains upside skew amidst prolonged supply chain instability, including the ILA’s Oct 1 strike and its follow-on congestion effects.

  • Signals immediately emerged in bond markets that reflected long-term inflation concerns after Thursday’s data, with yields on long-dated sovereign debt jumping to two-month highs alongside the strongest foreign participation in a 30YR bond auction in recent history.

September’s annualized core CPI of 3.3% v. August’s 3.2% adds to existing uncertainty about the knock-on inflationary effects of the Fed’s Sep 18 jumbo 50 bps point cut.

  • With immediate risks from a prolonged ILA strike resolved, supply chain price pressures will likely ease through the remainder of Q4. However, downstream congestion from the ILA’s three-day strike and Mideast risks to vessel activity will likely prohibit material disinflation for October.

Inflation’s upside skew poses an issue for US labor markets if gov reports like the BLS’ initial jobless claims increasingly align with trends in anecdotal employment data.

  • At face value, this week’s 14.7% W/W jump in initial jobless claims might be attributed to the Southeast’s Hurricane Helene fallout. However, advance state-level claims show Midwest states drove the largest share of new weekly claims, led by manufacturing layoffs in Michigan.

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