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Jobless Claims Unexpectedly Fell and Inflation Ticked Down, Suggesting Strong U.S. Economy Unfazed by Trade War

Workers listen as US President Donald Trump speaks about trade at US Steel's Granite City Works steel mill in Granite City, Illinois July 26, 2018. (Photo by SAUL LOEB / AFP) (Photo credit should read SAUL LOEB/AFP/Getty Images)
SAUL LOEB/AFP/Getty Images

Applications for new unemployment benefits unexpectedly fell last week and producer prices fell, indicating that the strong U.S. economy is standing up quite well amid global trade disputes.

Initial jobless claims fell declined by 6,000 a seasonally adjusted 213,000, the Labor Department said Thursday. Economists had expected the rate to rise to 220,000.

The four-week moving average of claims, considered a more reliable measure of the labor market because it smooths out week-to-week volatility, fell to 214,250.  That is equal to the 48-year low set in May, according to Schwab’s Randy Federick.

There had been some reports of layoffs due to tariff pressure. The decline in claims, however, suggests that the U.S. labor market is very strong overall. Prior to the Trump presidency, unemployment claims have not been this low since the 1970s.

A similar story is playing out in price data. There have been numerous claims that tariffs and trade disputes will push up prices, acting as a tax on U.S. consumers. But a measure of prices before they reach the consumer, known as the producer price index, unexpectedly fell in July.

The producer price index showed prices up 3.3 percent compared with a year earlier. That’s a decline from 3.4 percent in June. Economists had expected producer prices to rise.

On Friday, the U.S. government will release the latest reading of consumer prices.

 

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