- Two men seriously hurt in crash near Fruitland (9/21/16)3
- Perryville man arrested for alleged patronizing prostitution, harassment (9/23/16)6
- Video and evidence largely confirm trooper's claims in April traffic stop shooting (9/23/16)7
- Cape man may lose eye after shovel beating, police say (9/25/16)2
- Funeral procession of former Cape Girardeau police chief Henry H. Gerecke (9/22/16)17
- Cape man accused of attacking pregnant girlfriend (9/22/16)
- Driver charged with manslaughter in crash that killed 2 (9/27/16)
- Show Me Center upgrades may allow facility to draw more elaborate shows (9/21/16)17
- Man convicted of Perryville convenience-store heist (9/21/16)
- Planning, design puts renovations of H-H building into hotel on hold (9/26/16)4
Consumer prices surge; job market remains strained
WASHINGTON -- Inflation is running at the fastest pace in 17 years, the job market is under further strain and foreclosure filings are surging.
A raft of gloomy economic data on Thursday represented a setback for those hoping to see signs of better times ahead and it may keep the Federal Reserve jammed between rising inflation and slowing growth.
The Labor Department reported that consumer prices shot up by 0.8 percent in July, double the increase economists had expected. The rise was only slightly lower than the 1.1 percent surge in June that had been the second-highest monthly increase in the last 26 years.
The big gains left inflation increasing by 5.6 percent over the past year, the largest 12-month jump since the period ending in January 1991.
Core inflation, which excludes volatile food and energy costs, rose 0.3 percent in July, slightly higher than the 0.2 percent increase that economists had expected. For the past 12 months, core inflation has risen by 2.5 percent, the highest 12-month change since February.
The biggest price pressures came in the energy and food sectors, just as they have all year. But the price gains spread to other areas, too -- clothing costs jumped by the largest amount in a decade, airline fares rose sharply and the cost of hotel rooms and tobacco products also climbed.
"For the average American, these inflation numbers are very bad news. It means that their purchasing power has been cut and their wages aren't going very far," said Mark Zandi, chief economist at Moody's Economy.com.
Indeed, the Labor Department said in a separate report that average weekly wages, after adjusting for inflation, fell by 3.1 percent in July compared to a year ago, the biggest year-over-year decline since November 1990.
Wall Street rebounded on Thursday, propelled by a further drop in oil prices and investors taking advantage of bargains in financial stocks after two straight days of heavy declines. The Dow Jones industrial average rose 82.97 points to close at 11,615.93.
Some economists said they believed this could be the last truly terrible inflation report. Energy prices have been falling since hitting a peak last month and food prices are expected to moderate given reports of likely bumper harvests for corn and soybeans.
But other analysts worried the July price report could be a signal that inflation is not going to moderate quickly because the long surge in energy prices is now starting to spread to other sectors of the economy.
William Dunkelberg, chief economist for the National Federation of Independent Business, said the store and restaurant owners represented by his organization report that inflation is now their No. 1 problem. They are being forced to raise prices on their customers because their suppliers are hiking prices.
"All of their costs are rising very quickly and they are getting hammered," Dunkelberg said, noting that 42 percent of the businesses in the latest NFIB survey reported raising prices, the highest percentage in a quarter-century.
John McDonald, 64, of Chicago, said that he had definitely noticed the price increases when he goes food shopping.
"We're retired and you can see it in the grocery stores," he said. He and his wife have switched to cheaper brands when they could.
The Labor Department also reported Thursday that the number of newly laid off workers filing for unemployment benefits fell by 10,000 last week to 450,000. But that decline was less than expected and left the four-week moving average at the highest level in six years. The number of people receiving jobless benefits rose to 3.42 million, the highest level since November 2003.
Separately, the number of foreclosure filings jumped by more than 50 percent in July, according to Irvine, Calif.-based Realty Trac Inc. The National Associated of Realtors reported that median home prices fell in three-fourths of the cities it surveyed in the April-June quarter.
Democrats, who hope to win control of the White House in the November elections, said the new reports were evidence of failed Republican economic policies.
"Today, we got the truly shocking news that inflation hit a 17-year high of 5.6 percent," Jason Furman, economic policy director for Democratic presidential candidate Barack Obama, said in a statement. "Families have now lost an entire decade's worth of raises to inflation as weekly earnings adjusted for inflation lies below the level they reached in August 1998."
Sen. Charles Schumer, D-N.Y., noting the news on inflation, rising jobless claims, soaring mortgage foreclosures and falling real incomes, said, "If this administration were competing in the 'bad economic policy' Olympics, they'd receive four gold medals today."
Responding to the new economic reports, White House press secretary Dana Perino said, "It will take some time for the economy to turn around."
She called the high jobless claims figures "not welcome" but said unemployment at 5.7 percent in July still remained lower than it has been in past periods of economic weakness. On inflation, she said that crude oil and gasoline prices both hit all-time highs in July and have since fallen.
Douglas Holtz-Eakin, McCain's top economic advisor, said that Obama's economic policies would result in higher taxes and wasteful government spending. "Obamanomics is lavish government spending that must be paid for by new tax increases on a struggling economy," Holtz-Eakin said in a statement.
In July, energy prices jumped by 4 percent, driven upward by a 4.1 percent rise in gasoline prices, which last month were 37.9 percent higher than a year ago.
After hitting a record of $4.11 per gallon in mid-July, gasoline prices have been falling in recent weeks, now averaging $3.79 per gallon, according to the survey by auto club AAA and the Oil Price Information Service.
Crude oil prices are also down about $30 per barrel from a peak in early July and analysts are hoping that this decline will help relieve some of the pressures on energy costs.
Food costs shot up by 0.9 percent in July, reflecting higher costs for a wide variety of products. Over the past 12 months, food prices have risen by 6 percent, the biggest jump in decades. The Agriculture Department reported Tuesday that this year's corn and soybean harvests will be among the largest in history, though, easing fears that had been fueled after heavy flooding in the Midwest in June.
The new inflation report puts the Federal Reserve in a difficult spot, caught between a desire to keep interest rates low until the economy shows signs of rebounding and the growing threat of inflation. Private economists said they still believe the Fed will choose to leave interest rates unchanged for the rest of the year, however.