U.S. sees stagnant jobs market, rising inflation

Read: Philadelphia Fed data point to recession

There was some disconcerting economic news out of the U.S. this morning, with job growth stagnating and inflation on the rise.

The number of Americans applying for unemployment benefits crept back above the 400,000 last week, hitting a four-week high of 408,000, according to the Labor Department.

Applications have been above 400,000 for 18 of the past 19 weeks. Applications typically must fall below 375,000 to signal healthy job growth. The last time they were that low was in late February.

Two weeks ago, applications dropped to 399,000. That was the first time they had fallen below 400,000 since early April.

Employers added 117,000 net jobs in July, roughly double the totals from each of the previous two months. The unemployment rate ticked down to 9.1%.

July’s job gains are barely enough to keep up with population growth. At least double that many new jobs are needed to significantly reduce unemployment. And a consumer sentiment survey taken earlier this month showed confidence in the economy fell to the lowest level in 31 years, raising concerns that Americans could pull back on spending.

“Despite the modest increase, the four-week moving average edged lower to 403k from 406k,” wrote Michael Gapen, director, U.S. economic research at Barclays Capital. While continuing claims edged higher by 7,000, to 3.702 million claimants, he sees cause for hope in the four-week moving average, which has shown “modest improvement” since July.

“We characterize recent trends in claims data as indicating that labor market softness in the second quarter has largely abated, consistent with other production data that suggest that supply chain disruptions from the earthquake in Japan are easing,” he said.

Meanwhile, prices for gas, food and clothing are on the rise. The Consumer Price Index rose 0.5% in July, following a drop of 0.2% in June. Gas prices accounted for much of the swing. The core index, which excludes volatile food and energy, rose 0.2%.

Consumers spent more on retail goods in July than in any month since March. And factory output rose in July by the most since the Japan crisis, a sign that supply chain disruptions caused by the March 11 earthquake could be fading.

“Americans are paying more for rent (owners’ equivalent rent) even though housing prices are falling and there is excess inventory; this is demand driven as Americans are changing their attitudes towards housing,” said Chris G. Christopher, Jr., senior principal economist, IHS Global Insight. “The Fed will be watching core inflation very closely. If it continues to ease it will give the Fed more ammunition to implement more stimulus such as QE III.”

Read: Philadelphia Fed data point to recession