Inflation Is Coming But Will It Be Transitory?

The biggest suppressant of core CPI has been shelter inflation. New and existing home prices have risen, but rent inflation has been low due to the moratorium on evictions and the weakness in cities. If shelter inflation spikes in the next 6 months, we can get to 3% core CPI.

As you can see from the chart below, the median consumer expectation for rental costs is a 9% increase in the next year which is up from 6.4% in January.

From 2014 to 2020, this never went above 6%. Shelter inflation is about to lap extremely easy readings later this year. The weakness starts in March. We will definitely see a bottom in yearly shelter CPI in the March reading. The March report comes out in about a month since the February reading came out on Wednesday. 

Job Postings Are Back

We expect much higher job creation in March than in February. This expectation is supported by the latest job posting data from Indeed. As you can see from the chart below, job postings are now 6.7% above the pre-pandemic peak. This is updated as of the first week of March. We are excited to see the coming decline in jobless claims. Alaska just announced everyone over the age of 16 can now get the vaccine. There are now less than 40,000 Americans hospitalized with the virus.

Child Stimulus

The stimulus has a monthly payment per child almost like a universal basic income. There is about be $250 per month ($300 per month for children under 6) given out from July to December. This is probably overkill if we’re trying to counter the effects of the pandemic because the economy should be much closer to full employment by July. However, helping parents is a major victory because having children has gotten too expensive.

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