Economist's Commentary: August 14, 2008

Quick Take on the Economy: August 14, 2008

By Danielle Hale, Research Economist

CPI advanced 0.8 percent in July, following a 1.1 percent increase in June.
Price increases occurred in the indexes for food, energy, and all-items other than food and energy for at least the second month in a row.

Seasonally adjusted initial claims for unemployment insurance were 450,000 in the week of August 9. This figure is a 10,000 claim decrease from the previous week's revised figure but still indicates a weak job situation, and is similar to levels last seen in 2001-2003.
Ohio saw the greatest decrease in initial unemployment claims and Illinois saw the largest increase. The biggest industry drivers were the automobile, manufacturing, and trade industries.

The combination of rising prices and soft job market conditions continues to make consumers unhappy and the Federal Open Market Committee's (FOMC) job of setting the Federal Funds rate difficult. The prescription for a weak economy is rate decreases, but rate increases are the remedy to inflation.
When the FOMC is pulled in different directions by the data-as they are now-they tend to try to hold off on big changes in policy until they can more clearly determine which trend is dominant. For these reasons, we can still expect the Fed to keep the Fed Funds rate at 2.0% at the next meeting on September 16.
REALTORS® and consumers seeking to insulate themselves from inflation in the meanwhile may use real estate as a hedge.

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