Consumer Prices Rise, Producer Prices Stagnate, and the Labor Market Tightens

​Data released by the Labor Department last week showed consumer prices rising dramatically, producer prices stagnating from the prior month, and job vacancies increasing to 6.7 million in the second quarter.

• As the labor market stays tight, businesses are struggling to fill job vacancies. According to the Labor Department, as of June 30th, job openings grew by 750,000 from one year prior, leading to a total of 6.7 million unfilled positions. The Labor Department estimates that openings outnumber unemployed workers by 100,000. The transportation and retail sectors are experiencing the grunt of the shortage. Transportation job openings grew 58% on an annualized basis, and the retail sector is responsible for 165,000 of the three-quarter million growth in job openings.

• Inflation has begun to show signs of cooling, according to the Producer Price Index released Thursday. The measure of prices that business receive for goods and services, one of the key measures of inflation (excluding food and energy), was up 0.1% in July from a month prior. For the twelve months ending in July, the index is up 3.3%, down from the 3.4% reading for the year ending in June. Economists believe last month’s figure is only temporary in the context of a tight labor market and an escalating trade war, and many generally expect inflation to pick up in the coming months.
  

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• U.S. consumer prices took a dramatic turn upwards last month. According to the Bureau of Labor Statistics, the Consumer Price Index rose 2.9% for the trailing twelve months through July, the highest since 2011. However, excluding the volatile energy and food categories, the CPI rose 2.4%, the fastest acceleration for the so-called “core prices” since September 2008, in the midst of the Great Recession. With wages only rising roughly 2.7% last month despite a historically tight labor market, inflation for consumer expenses will begin to eat into paychecks. Per the Wall Street Journal, or the second time in four years, average hourly earnings, after inflation, fell over the last twelve months.