No consensus

Is the economy weakening? Is inflation slowing? What about the strength of the labor markets? Enough information has been released over the last week to support either side of each question. Just when it seems that a clear line has been drawn, something blurs it.

Case in point is weekly jobless claims, which surprisingly fell from 229,000 last week to 216,000, the lowest level since February. Claims have averaged 231,000 this year and have been on a downward trend since early August. There does not seem to be weakness in the labor market.

Inflation has fallen sharply from its peak last summer, but recent gains have been slower and it simply remains too high. Medium- and long-term expectations remain relatively well-anchored in a range consistent with the Federal Reserve’s 2% target.

Measures of services and manufacturing activity rose in August, led by prices-paid and employment. That’s not the script for a cooling economy. 

Next week’s economic data brings updates on consumer prices, retail sales, industrial production and consumer sentiment. The Fed will have lots to chew on before its meeting on September 20.