The pace of price increases over the past year was higher than expected in September, the Labor Department reported Thursday, while unemployment claims recorded an unexpected jump in the wake of Hurricane Helen and the Boeing strike.
The Consumer Price Index, a broad gauge that measures the costs of goods and services throughout the U.S. economy, rose a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 2.4%. Both readings were 0.1 percentage point above the Dow Jones consensus.
The annual inflation rate was 0.1 percentage point lower than in August and was the lowest since February 2021.
Excluding food and energy, core prices rose by 0.3% on a monthly basis, bringing the annual rate to 3.3%. Both core readings were also 0.1 percentage points above expectations.
A separate report on Thursday showed that weekly jobless claims reached their highest level in 14 months, indicating potential weakness in the labor market despite a large jump in nonfarm payrolls in September. However, most of the increase can be linked to the hurricane and strike.
Most of the increase in inflation — more than three-quarters of the move higher — came from a 0.4% jump in food prices and a 0.2% increase in shelter costs, the BLS said in the release. This was offset by a 1.9% decrease in energy prices.
Other items contributing to the gains included a 0.3% increase in used vehicle costs and a 0.2% rise in new vehicles. Medical care services rose by 0.7% and clothing prices rose by 1.1%.
Stock market futures fell after the report while Treasury yields were mixed.
The release comes as the Federal Reserve begins cutting benchmark interest rates. After cutting by half a percentage point in September, the central bank is expected to continue cutting, although the pace and degree remain in question.
Fed officials have become more confident that inflation is falling toward their 2% target while expressing some concern about the state of the labor market.
“It's the overall trend that matters, not the daily fluctuations,” Chicago Fed President Austan Goolsbee said in an interview with CNBC's “Squawk on the Street” program following the report's release. “Clearly the general trend over 12 or 18 months is that inflation has come down a lot, and the labor market has slowed to a level that we think is close to full employment.”
While the CPI is not the Fed's official measure of inflation, it is part of the dashboard that central bank policymakers use when making decisions. Many of its components go directly into the Fed's headline PCE price index.
Although the inflation reading was higher than expected, traders in futures markets increased their bets that the Fed will cut interest rates by a quarter of a percentage point at its policy meeting scheduled for November 6-7, to about 86%, according to For CME Group's FedWatch metric.
Goolsby said the data is broadly in line with the Fed's expectations and should not be viewed in isolation as having a significant impact on policy.
“I just want to warn everyone, let's settle down when the one-month numbers come in,” he said. “This is not what we should be basing monetary policy on. We should be basing it on the long part.”
In recent days, policymakers have said they see growing risks in the labor market, and another data point on Thursday helped support that point.
Initial claims for unemployment benefits took an unexpected upward turn, reaching a seasonally adjusted 258,000 for the week ending October 5. This was the highest total since August 5, 2023, an increase of 33,000 from the previous week and well above expectations of 230,000.
Continuing claims, which were delayed by a week, rose to 1.861 million, an increase of 42,000.
The unemployment claims numbers come on the heels of damage from Hurricane Helen, which struck on Sept. 26 and affected a large swath of the Southeast. Florida and North Carolina, two of the hardest-hit states, recorded a combined increase of 12,376, according to unadjusted data.
A strike by 33,000 Boeing workers could also hit the numbers. Michigan had the largest gain in claims, up 9,490 during the week.
On the inflation side, rising prices across a variety of food categories have shown that the going is tough.
Egg prices jumped by 8.4%, bringing the unadjusted increase over 12 months to 39.6%. Butter is up 2.8% over the month and 7.8% over the past year.
However, shelter costs, which remained higher than Fed officials expected this year, rose 4.9% year over year, a move that may signal an easing of broader price pressures to come. This category makes up more than a third of the total weighting in the CPI calculation.
