Inflation and Jobless Claims
Scott B. MacDonald, Ph.D. — Smith's Research & Gradings — September 11, 2025
Inflation and Jobless Claims
• Inflation numbers rose by 0.4% month-o-month for August and 2.9% y-o-y, according to the latest CPI report.
• Core inflation rises to 3/1% y-o-y, the same as last month and yearly. The main drivers were food, food away from home (dining out at Cracker Barrel and Waffle House), autos and used autos.
• Airline fares +5.9%
• Used cars and trucks +1.0%
• Apparel +0.5%
• Decliners - Medical care (-0.2%), recreation (-0.1%) and communication (-0.1%)
• Energy costs were down marginally but not enough to offset other rising price pressures related to tariffs (you know, taxes).
• Comment of the day: David Russell, global head of Market Strategy at TradeStation: "There seems to be some pass-through of tariffs in apparel, so inflation isn't gone yet. Shelter also isn't dropping the way many would hope. These numbers aren't perfect but they're good enough to keep the Fed on track for rate cuts."
Also released: Initial jobless claims
• Applications for US unemployment benefits jumped last week to the highest level in almost four years, indicating layoff activity may be on the rise amid a sharp slowdown in hiring.
• Initial claims rose by 27,000 to 263,000 in the week ended Sept. 6, the highest since October 2021, according to Labor Department data released Thursday. The median forecast in a Bloomberg survey of economists called for 235,000 applications.
• Our take - the data shows more initial jobless claims, which reflects a softening labor market, which builds the case for rate cuts. Equally important, while claims were up, corporate America is not undergoing largescale downsizings. Corporate America is being cautious due to the uncertainty around tariff policies. No one wants to hire too many workers and then fire them. Better to put on hold hiring.
Three quick points:
1. Today's data mix keeps rate cuts on track. Still 25 bps as inflation still lurks like a gremlin in the shadows.
2. Tariffs are being felt more this past quarter and will have a bigger impact on Q4. Look for GDP to slow.
3. There will be talk of recession and stagflation. However, the Big Beautiful Bill, for all of its deficit and debt negatives, is likely to function as a giant lump of sugar for Q1, with all sorts of tax breaks and deregulation.
More with the evening news...
