Inflation Jumps to 7.5% in January, Jobless Claims Fall

What Thursday’s Economic Reports Tell Us

Woman With Shopping Cart in Store

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Inflation accelerated again in January, hitting a new decades-high of 7.5%, while the volume of new unemployment claims fell for a third week, reports showed Thursday.

Here’s a quick look at the most significant economic indicators of the day and what they tell us.

Consumer Price Index 

  • The inflation rate accelerated yet again, blowing past economists’ expectations to reach the highest since February 1982, data from the Bureau of Labor Statistics showed. The Consumer Price Index rose 7.5% in the 12 months through January, up from 7% in the 12 months through December and higher than the 7.2% economists had forecast. The cost of groceries, electricity, and housing were among the major contributors. 
  • Consumer costs have been relentlessly higher in the past year amid fallout from the pandemic. The mismatch between supply and demand (worker and material shortages can’t keep up with everything people want and need to buy) has made it more expensive (and often harder) to get just about everything.

Initial Unemployment Claims

  • The number of people initiating claims for unemployment insurance fell for the third straight week, a sign that damage from the latest surge in COVID-19 cases is fading. Claims dropped to 223,000 last week, down from 239,000 the week before and a recent peak of 290,000, according to the Department of Labor. 
  • The weekly volume of initial claims—in the millions during the initial pandemic crush on the economy in the spring of 2020—finally recovered fully late last year, returning to the low 200,000s typical before COVID-19. But the spike in virus cases triggered by the omicron variant pushed claims back up a bit in January, leaving some uncertainty about how lasting the impact would be. “The damage appears to be modest and short-lived,” said Dante DeAntonio, a senior economist with Moody’s Analytics. “All signs point to ongoing improvement.”

‘Real’ Wages

  • Hourly earnings rose enough to compensate a tad for the inflation, so “real” wages— meaning wages that have been adjusted for someone’s eroding purchasing power—rose 0.1% in January, according to the Bureau of Labor Statistics.
  • In other words, average hourly earnings rose 0.7% to $31.63, while the Consumer Price Index rose 0.6% from December to January, so the net effect is a 0.1% increase. Still, real wages are down 1.7% over the last year because earnings haven’t entirely made up for how much more everything costs.

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Article Sources

  1. Bureau of Labor Statistics. “Consumer Price Index Summary.”

  2. Federal Reserve. “The Beige Book.”

  3. Centers for Disease Control and Prevention. “COVID Data Tracker.”

  4. Department of Labor. “Unemployment Insurance Weekly Claims.”

  5. Bureau of Labor Statistics. “Real Earnings Summary - 2022 M01 Results.”