In the week ended the 14th of January, US initial jobless claims dropped at its sharpest pace since September 2005. Initial claims fell by 50 000 from an upwardly revised 402 00 to 352 000, while only a marginal decline was expected. Initial jobless claims are now back at the lowest level since April 2008.
The less volatile four-week moving average dropped too, from 382 500 to 379 000. The labour department added that there was nothing unusual in the data. Continuing claims, which are reported with an extra month lag, dropped sharply too. In the week ended the 7th of January, continuing claims fell by 215 000 to a total level of 3 432 000, which is also a new cyclical low. The claims are now again at the levels registered before the holidays and even somewhat lower, which suggests that the uptick in the previous weeks was probably due to seasonal factors, which distorted the data during the Christmas holidays. While confirmation is needed in the coming weeks, this sharp drop in claims raises expectations that the US labour market continues to improve at the start of the new year.
In December, US CPI inflation eased from 3.4% Y/Y to 3.0% Y/Y, in line with expectations. On a monthly basis, inflation stayed unchanged, for a second straight month and after falling by 0.1% M/M in October. The details show that downward price pressures were mainly based in energy (-1.3% M/M) and other oil-related products: fuels & utilities (-0.2% M/M) and gasoline (-2.0% M/M). Also prices of personal computes (-2.5% M/M), vehicles (-0.4% M/M), commodities (-0.3% M/M) and apparel (-0.1% M/M) dropped in December. Upward price pressures on the contrary were based in: medical care (0.4% M/M), recreation (0.4% M/M), food & beverages (0.2% M/M) and housing (0.1% M/M).
As a result, core CPI rose slightly from the previous month (0.1% M/M), while the annual rate stayed unchanged at a three-year high of 2.2% Y/Y, which was in line with expectations. While headline inflation dropped significantly over the previous months, core CPI remains elevated as lower prices for vehicles and clothing were offset by higher prices for seasonal goods as recreation and food and beverages, which were probably boosted by the Christmas holidays. Over the coming months, also core CPI is forecasted to drop slightly lower.