There’s a big argument about whether the US is undergoing inflation. A look at today’s jobless claims is a fairly good indication that we are not having inflation at this time.
Of course, the ever-optimistic Wall Street Journal doesn’t agree that jobs and inflation are linked. In their story on the current jobs report, they note that government and private employment statistics don’t always match up. Still:
Ian Shepherdson, economist at High Frequency Economics, … expects Friday’s job report to show that the economy added a total of 175,000 jobs, with a gain of 200,000 private jobs offset by the loss of 25,000 government jobs. Before Thursday’s news, he expected the June employment report to show the addition of 100,000 jobs after adding 54,000 in May.”
IFO thinks that as long as we have this high unemployment, what looks like inflation to us is more likely loss of income. When you start to struggle to pay your bills, you conclude that you are facing inflation. If your spouse has lost a job, you’ll struggle, even though prices are fairly stable. If your home is losing its value, you can’t use it for an ATM any more – more struggle.
As the SWI (IFO’s Swiss Watch Index) shows, there’s more than one way to skin an economy. The government has cleverly reduced the value of the USDollar, which we don’t notice unless we are paying attention to the currency markets. Clever, dedicated readers of IFO are now following the currency markets through the Swiss Watch Index.
Still, you’ll hear people swear up and down that there is indeed inflation and soon to come is… gasp! hyperinflation!!! They get quite angry when anyone counters that opinion. This is an attitude situation. Some people believe everything is bad and getting worse, others don’t. IFO tries to stay balanced.
With the current volatility – mainly up for a change – in the stock market, it’s hard to remember how much money the Fed has pumped into, uh, somewhere – the banks? pension funds? unions? But a rising stock market is no sign of inflation. People won’t pay more for stuff until they have more money. Then we’ll have inflation.