Dec 9, 2021 - Politics & Policy

CPI: The new jobs number

Grocery shoppers are seen in Washington. D.C., last month.

Grocery shoppers in Washington, D.C., last month. Photo: Ting Shen/Xinhua via Getty Images

The Consumer Price Index has replaced the jobs report as the most anticipated data drop by the U.S. government.

Why it matters: Rising prices tend to lower political fortunes. Washington and Wall Street are now waiting for the CPI number to flash at 8:30am ET around the 10th day of each month. This month's report — due Friday morning — will give a reading of how hot inflation ran in November.

  • Economists expect the monthly CPI to rise 0.7% month-on-month, for an annual rate of 6.7%.
  • October’s 6.2% annual reading was the highest since 1990.

The big picture: With unemployment at 4.2%, Congress and the Federal Reserve appear more interested in price pressures than the jobless rate.

  • Sen. Joe Manchin (D-W.Va.) has made clear he wants a better read on inflation before agreeing to President Biden’s plan to spend an additional $1.75 trillion to combat climate change and expand the social safety net.
  • Last month’s red-hot reading validated Manchin's earlier inflation concerns.

Flashback: Before the 2012 election, the political implications of the jobs report were so manifest that Jack Welch, a former CEO of General Electric, went full-on conspiracy theory.

  • He accused the Obama White House of cooking the numbers when September's unemployment rate dropped to 7.8%.
  • "Can’t debate, so change numbers,” he tweeted.

What they are saying: “When I was at CEA, we would have an all-out mobilization around jobs day but barely noticed when the CPI came out. Now, it is almost the reverse,” said Jason Furman, who served as one of President Obama's chair of the Council of Economic Advisers.

  • “The CPI number is much more salient in an era when inflation is very much not under control,” Larry Summers, a former Treasury secretary, told Axios.
  • “CPI hasn’t entirely supplanted the employment report, because the employment report has all the wage data, like the changes in average hourly earnings,” he added.

The other side: Jobs day still has its loyalists, including Nela Richard, the chief economist at ADP.

  • She rates CPI as "the second-most important indicator there is, next to jobs."

How it works: Both the CPI number and the jobs data — including the household and establishment survey — are compiled by the Labor Department the day before their 8:30am release.

  • At the White House, the CEA chair get the numbers first, and starts to prepare a memo, which is eyes-only for the president, vice president and top economic advisers.
  • Some CEA chairs liked to deliver good jobs reports in person on Thursday night, potentially tipping off markets that an in-person delivery presaged a better-than-expected report.
  • While Obama tended to avoid public appearances after receiving the jobs number, lest he betray the report, President Trump was less discreet.
  • “Looking forward to seeing the unemployment numbers at 8:30 this morning," Trump tweeted at 7:21 a.m on a fine Washington spring morning in 2018.

Go deeper: Administration officials note some of the factors that will drive November's CPI, like high energy and used-car prices, have eased since the end of the month — yet won’t be reflected in this report.

  • While acknowledging prices are up, Biden officials prefer to look at the overall economic picture.
  • They point to job growth, a growing economy and an increase in real disposable income.

The bottom line: One of the White House's favorite economists, Mark Zandi, warns November's number will be "ugly."

  • "CPI inflation of 7% is possible," Zandi, the chief economist of Moody's Analytics, tweeted. "But this is the last really bad inflation number. Inflation a year from now will be closer to 3%."
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