Inflation and unemployment filings are up, with no silver lining this time

What they're saying: "Recent inflation trends reveal a clear upward shift, with short-term inflation dynamics moving noticeably higher," EY-Parthenon senior economist Lydia Boussour wrote in a note, adding that tariff cost pass-through has been "gradual and uneven."

• "While many businesses have managed to soften the impact of rising costs by relying on pre-tariff inventories and accepting slimmer profit margins, these buffers are likely to continue to fade," Boussour wrote.

By the numbers: The Consumer Price Index rose 0.4% in August, doubling the prior month's pace, with large increases in the cost of food and gasoline.

• Over the previous 12 months, CPI increased 2.9%, after rising 2.7% in July.
• Core CPI, excluding food and energy, neither heated up nor cooled: It rose 0.3% for the second month and held at 3.1% in the year ending in August.
• But that measure — which Federal Reserve officials consider a better indication of underlying inflation — is running at a 3.6% annualized pace over the past three months, the highest since January.

The big picture: The details of the CPI report illustrate the problem for the Fed, which still looks on track to cut interest rates next week. Goods prices are rising, but the services sector is not offsetting that rise — keeping inflation elevated.

• Core goods prices, the items most likely to be impacted by tariffs, rose 0.3%, according to calculations by Yale Budget Lab's Ernie Tedeschi — the biggest spike all year, as prices for clothing and vehicles jumped.
• At the same time, service sector inflation is no longer cooling. In August, the housing index popped 0.4%, interrupting a streak of more benign increases. Airline fares soared almost 6% — a monthly increase not seen since the height of the 2022 inflation shock.

The other side: The report might be less concerning if you are in the camp that believes tariff price pressures will fade.

• Fed governor Christopher Waller, among President Trump's top picks to next lead the central bank, has doubled down on that being the case.

• In a speech last month, Waller said that monthly tariff effects in the inflation data would dissipate by early 2026.

The intrigue: Right as the inflation report hit, so did weekly figures on unemployment filings.

• Jobless claims skyrocketed by 27,000 to 263,000 last week, the highest level since October 2021.
• "For the first time in a long time, CPI is being overshadowed on its release day by another data series — initial jobless claims," ClearBridge Investments' Josh Jamner wrote in a client note.
• Hiring is already sluggish, but layoffs had remained relatively low. The data suggests this dynamic could be changing, as more Americans filed for unemployment benefits.

Yes, but: It's unclear whether the surge in unemployment applications was a result of quirks, including Labor Day-driven volatility.

• Texas reported an outsized jump in claims, one that "looks to be short-lived," Samuel Tombs, chief U.S. economist at Pantheon, said in a report, though he cautioned that claims were still on an "upward trend."

The bottom line: "With inflation moving higher and the job market softening, the Fed is in a pickle," Bill Adams, Comerica's chief economist, wrote in a note.

• He said the "hot CPI report is an argument for the Fed to 'proceed carefully' with rate cuts."