• AIM Team

NAM: Monday Economic Report

  • Consumer prices rose 0.5% in July, reflecting some moderation in costs for used cars and trucks and transportation services, both of which have risen sharply in recent months. Still, the consumer price index has risen 5.3% (seasonally adjusted) over the past 12 months, the same year-over-year pace as in June, remaining the fastest since September 2008.

  • Core consumer inflation (which excludes food and energy) increased a seasonally adjusted 4.2% year-over-year in July, slowing from 4.5% in June, which was the most since November 1991.

  • The average hourly earnings of production and nonsupervisory workers in manufacturing have risen 4.5% year-over-year, up to $23.86 in July. Yet, real average hourly earnings for production and nonsupervisory workers in manufacturing have fallen 1.0% since November, as consumer inflation has reduced the real earnings of everyday manufacturing workers.

  • Similarly, producer prices for final demand goods and services have jumped a seasonally adjusted 7.7%, the biggest increase on record. At the same time, core producer prices have increased a record 6.1% since July 2020.

  • Manufacturing leaders continue to cite supply chain disruptions and soaring costs as key challenges. That will put pressure on the Federal Reserve. In my view, the Federal Open Market Committee will start the process of tapering asset purchases at its next meeting in September, with the federal funds rate edging higher by mid-2022.

  • Meanwhile, manufacturing job openings eased from a record 853,000 in May to 826,000 in June, remaining highly elevated and above 800,000 for the third straight month. Manufacturers continue to cite difficulties with attracting and retaining talent as one of their top concerns.

  • In the larger economy, nonfarm business job openings rose to 10,073,000 in June, a new record. In June, there were 9,484,000 unemployed Americans, which translates to 0.94 unemployed workers for every one job opening in the U.S. economy. That speaks to the tightness of the labor market, with more job openings than people looking for work.

  • The Small Business Optimism Index declined from 102.5 in June to 99.7 in July. The percentage of respondents suggesting they had job openings they were unable to fill edged up from 46% to 49%, a new record, and the percentage of respondents saying there were few or no qualified applicants for job openings ticked up from 56% to 57%, matching the all-time high in May.

  • With that said, consumer confidence dropped to the lowest level since December 2011, according to preliminary data from the University of Michigan and Thomson Reuters. Americans felt more concerned about the continued spread of the delta variant of COVID-19 and its impacts on the economic outlook.