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Jobless Claims Spike

December 11, 2020

chart depicting the Median Absolute Changes in Initial Unemployment Claims by Holiday Week

Source: Department of Labor

Initial unemployment claims spiked by 137,000 last week to a two-and-a-half month high 853,000. Continuing claims also moved higher, pushing the insured unemployment rate up for the first time since August. Some of the whipsaw of the last two weeks almost certainly owes to holiday-related volatility – claims often make sizeable moves around Thanksgiving due to seasonal adjustment issues – but there is very likely some fundamental weakening here, as well. The labor market data flow has softened on balance over the last month and it is to be expected that these figures will come under further pressure in the weeks ahead as the COVID case count continues to climb and additional government restrictions are instituted. There is still relatively little scope for a sustained contraction given the knock-on effects from the ongoing housing boom, the healthy state of household balance sheets in aggregate, and, especially, the increasingly imminent prospect of vaccine deployment, but this recovery is now in its first soft patch and a short retrenchment is a growing possibility.

Inflation Edges Higher

The core CPI came in slightly ahead of expectations for November with an increase of 0.2 percent on the month and 1.6 percent year-over-year. Details were softer than the headline, however, as the Cleveland Fed’s median CPI inched up by just 0.1 percent and is now rising by a three-year low 2.3 percent on an annual basis. There are ongoing signs that significant long-term inflation risks are brewing – none more striking than the record-breaking increases in the money supply – but it is likely to take some time before these risks come to fruition. There is still a sizeable output gap and many of the long-term structural factors that have kept inflation in check for the better part of the last three decades (demographics, technological advancement, etc.) are still in place to varying degrees. Inflation remains a good bet to be the black swan event of this expansion, but, as with virtually all black swans, it will more likely come toward the cycle’s end rather than at its outset.

 

Daily Trivia

What was the first toy to be advertised on television, a spot that helped to make it the must-have holiday gift of 1952?

Previous Question

Who was confirmed as Fed chair by a Senate vote of 56-26, the narrowest margin in the history of the position?

Answer:

Janet Yellen

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