During this holiday-shortened week, traders will be keeping an eye on new inflation data at the producer level, as well as the early impacts on the labor market from the expiration of a crucial source of unemployment insurance during the pandemic.
Under Congress' Coronavirus Aid, Relief, and Economic Security (CARES) Act, millions of Americans were offered additional unemployment support during the pandemic with augmented federal unemployment benefits. These programs expire nationally on Monday, cutting enhanced unemployment benefits for some 7.5 million jobless workers, according to data from the Century Foundation.
The federal programs included Pandemic Unemployment Assistance (PUA), which provided longer-term unemployment relief for those that exhausted regular state unemployment benefits. It also included Pandemic Emergency Unemployment Compensation, or benefits for gig workers and contractors who did not qualify for regular state programs. Other crisis-era federal benefits included enhanced $300 per-week payments on top of regular state jobless benefits.
Over the summer, about half of U.S. states ended these federal unemployment benefits early, a move many of these states' lawmakers suggested would incentivize workers to rejoin the labor market.
And to be sure, weekly jobless claims data has reflected a general downtrend in the total number of individuals claiming unemployment benefits across all programs over the summer. As of the week ended Aug. 14 — or the latest date for which data is available — that number stood at 12.2 million, which was down from more than 18 million at the beginning of 2021.
In last Friday's August jobs report, the number of workers unemployed for 27 weeks or more declined by 246,000, which is "potentially an impact of expiring extended UI benefits in some states," Joel Kan, MBA associate vice president of economic and industry forecasting, said in an email.
Others, however, have contested whether the expiration of enhanced benefits and the drop in those claiming benefits has actually translated into commensurate employment gains.
"Our earlier research failed to find large effects of ending the programs in jobless claims data and alt-data indicators such as OpenTable dining and Google searches for 'jobs' as a measure of job search effort," JPMorgan economists Peter McCrory and Daniel Silver wrote in a note published Aug. 25.
"July employment growth does not seem to have been impacted by the changes to the unemployment insurance programs," they added. "There is essentially zero correlation between state-level employment growth in July and the time between the end of expanded UI benefits and the survey reference week. We similarly find no differences in earnings growth or labor force participation among those states that had ended benefits early. We will continue to closely monitor the state-level data as it may simply take some time for an effect to materialize in the aggregate data."
Producer Price Index
In an otherwise relatively light week for economic data and earnings reports, investors will be keeping an eye on the Labor Department's Producer Price Index (PPI) out on Friday. This print will give an updated look at the state of inflation in the U.S. at the producer level, and suggest whether ongoing supply chain constraints and materials shortages have continued to push prices higher.
The headline PPI is expected to slow to just a 0.6% monthly rise for August after a 1.0% jump from July, according to Bloomberg data. Last month's print had come in ahead of consensus estimates, suggesting more inflationary pressures at the producer level and higher costs for companies to have to try and pass off.
Excluding food and energy prices, core producer prices are expected to increase at a 0.5% monthly rate in August, also slowing from July's 1.0% climb.
But over last year, the broadest measure of producer price changes will likely leap by 8.2%, accelerating from July's 7.8% annual gain. That would mark the fastest year-over-year jump on record for the PPI. Many economists have noted that the sharp jumps in inflation reflect, in part, a jump off last year's pandemic-depressed levels. That would suggest price increases should slow in the coming months as the economy laps last year's virus-impacted data.
"Price metrics continue to be impacted by pandemic-related effects including strong demand and supply constraints," Rubeela Farooqi, chief U.S. economist for High Frequency Economics, wrote in a note about the July producer price index. "The reopening impact should diminish over coming months but there is less certainty about supply dislocations, which could be exacerbated due to spread of the Delta variant."
The sustainability of inflationary pressures, however, carries heavy implications for the path forward for monetary policy. Though the PPI is just one measure of price increases in the economy, the Federal Reserve's preferred gauge of inflation, or core personal consumption expenditures, has also recently overshot the central bank's target of 2%. Still, many monetary policymakers including Fed Chair Jerome Powell have reiterated that they believe this inflation will prove transitory, and ultimately moderate as the economic recovery matures.
Monday: No notable reports scheduled for release
Tuesday: No notable reports scheduled for release
Wednesday: MBA Mortgage Applications, week ended September 3 (-2.4% during prior week); JOLTS Job Openings, July (10.000 million expected, 10.073 million in June); Consumer Credit, July ($28.300 billion in July, $37.690 billion in June); Federal Reserve's Beige Book
Thursday: Initial jobless claims, week ended September 4 (343,000 expected, 340,000 during prior week); Continuing claims, week ended August 28 (2.748 million during prior week)
Friday: Producer Price Index, month-over-month, August (0.6% expected, 1.0% in July); Producer Price Index excluding food and energy, month-over-month, August (0.5% expected, 1.0% in July); Producer Price Index, year-over-year, August (8.3% expected. 7.8% in July) Producer Price Index excluding food and energy prices, year-over-year, August (6.6% expected, 6.2% in July); Wholesale Inventories, month-over-month, July final (0.6% expected, 0.6% in prior print)
Monday: No notable reports scheduled for release
Tuesday: Coupa Software (COUP) after market close
Thursday: Zscaler (ZS) after market close
Friday: Kroger (KR) after market close
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck