This week we were privy to both new inflation and initial unemployment claims data. The CPI data revealed a rather mundane inflation scenario. Meanwhile, the weekly initial claims number came in at a whopping 853K and missed estimates by the largest amount since June. Yet, even as these data seem to jive on the surface – prices muted while unemployment claims rise – other higher frequency data are painting a different picture: inflation up and claims up.

Indeed, CPI as calculated by the Bureau of Labor Statistics is full of adjustments and other processes that make it somewhat less useful as an inflation measure than other data series. We’ll leave that topic for another day. Suffice it to say that inflation expectations as measured by both the bond market and other survey data are painting a not so mundane picture of inflation. Meanwhile, there is less variability in the data when it comes to employment, which appears to be weakening markedly across many metrics.

As the reader can see in the first chart below, core CPI rose only 0.2% MoM and is up just 1.6% YoY (i.e. not strong). In contrast, both 2-year breakeven inflation expectations as priced by the Treasury bond market (an excellent real time measure of inflation) and ISM manufacturing prices are rising strongly and are at multi-year highs.