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Let's turn to the data. Jobless claims coming in at a nice 213 against an estimate of 215 and the previous number of 212. Lisa, jobless claims and continuing claims speak to the same thing we've been talking about for quite a while. Low hire, low fire. Low fire captured in jobless claims. Initial claims being very low. Low hire captured in some very sticky high continuing claims.
Yeah. And if you take a look at the initial claims four-week moving average, it actually has gone lower from 220,000 in the week before to 215,000 essentially with this latest data. So highlighting that. But you're right, continuing claims you've got to pay attention to because it actually kicked upward to 1.868 million, up from 1.82 million. A question here about whether that means that people aren't hiring, whether that's the issue, whether this is just a snafu tied to weather or some other disruption, or whether this really does highlight that maybe initial jobless claims don't really show the pain that people are experiencing under the surface.
This labor market has been frozen for quite a while. And this data this morning speaks to the same thing. It's the right kind of downside surprise on initial claims and it's the wrong kind of upside surprise on continuing claims. Mike McKee standing by. He's having a look at the data and he's got a special guest for us as well. Good morning, Mike.
Good morning, John. Well, claims are not the only number out this morning that matters. We're also looking at import prices for the month of January on a month-over-month basis. They're up two-tenths of a percent after a decline in the prior month. And we're also seeing ex-petroleum up four-tenths. That puts kind of a lie to the idea that foreigners are absorbing the tariffs because the prices should go down if that's the case. Also, productivity up 2.8%, which sounds good except it was up by 5.2% in the third quarter. So not as great a news as perhaps people had hoped. Let's get a read on how the economy is doing. Now you mentioned a special guest and indeed we do have one, Tom Barkin, president of the Richmond Fed. We're here at the Richmond Fed with him and I know you haven't had a chance to really look at these numbers but in general the low-fire, low-hire economy and the tariff-affected economy seem to be about what they have been.
Well, it's always good to come on right after a bunch of data comes out, but I wouldn't be as negative on the productivity as you just were. 2.8% on a last 10 or 20 or 30-year basis is a really good number and I think we are seeing companies invest in productivity and deliver it. Some of that technology, AI, but I think a lot of it is you were caught short workers three years ago, you invested in new processes, new staffing models, automation, and people are seeing the results today.
And that holds down inflation.
It does hold down inflation and it allows people to maintain margins at times when their input costs might be coming... well, input costs are probably going up for people who use petroleum.
So, I want to start there with obviously the Iran war just started, but what's your gut feel about how that's going to impact prices and the economy? Don't have any sense on how long it's going to take or what the implications are going to be?
Obviously, you watch oil prices. While the US is no longer a net importer, it's still the case that the price at the pump matters a lot in terms of sentiment, in terms of crowding out other spending. And so I'm just watching prices at the pump. They've jumped up over the last week. You can see that when you drive around, but of course, no one knows whether this is going to be short-term or long-term. And so we'll just see where it goes.
Well, back in the 1970s, we had the oil price shock and we had gas lines and people were miserable and having to pay all this money. And so the Fed eased into that. That turned out to be a mistake. Does this put on hold ideas for the time being of continuing to cut rates?
Well, I think we'll go meeting by meeting and we'll see what we see when we get there. You know, gas prices obviously, if they're up, that is inflationary. Textbook monetary policy would be you look through a short-term shock, but you don't look through a long-term shock. And I think that's a lot of the assessment people are going to have to make.
The Open Market Committee before the Iran war started basically the views seem to be that we're at peak tariffs now and inflation will start to come down in the latter half of the year. But you throw this into the equation, where would you put yourself in terms of thinking about the progression of inflation and when you might have enough information to decide whether a cut is worthwhile or not?
Well, we'll have to see how it evolves. If you go back to the fall, the conversations I have with businesses suggest to me that they believe their pricing power is very limited. Consumers are exhausted by inflation, affordability. People are pushing back, whether that be not purchasing or private label or trading down to lower price retailers or repairing rather than replacing. And so in the conversations you have, you do have a sense that we're on the back side of this inflationary period. We'll head back to normal. In the numbers in the fall, absent the government shutdown, we're seeing much the same thing. I will say over the last month and with the PCE numbers that we're expecting next week, you've got a couple months of relatively high inflation, that certainly puts pause to any conclusion that we're done fighting this, but we'll see where we go.
Well, slicing the business leaders are telling you a little more closely. They know consumers are price sensitive and they're worried about that, but are they also in a situation where they've had to absorb too much? And if we see more price increases of inputs, they're going to have to raise prices.
Well, that's where we come back to productivity as being so key to this whole story because most every business I talked to last April that got tariffs was going to pass it on. It was just clear and they needed to maintain margins, the consumer was going to have to take it. And when they experimented with that, they got a lot of push back and so prices didn't increase the way that a lot of those folks expected. Now, their margins have been very steady and so corporate margins are quite healthy. Earnings were up, I think, 13% fourth quarter, year-over-year. And that's because productivity has allowed people to absorb these hits without having affect margins and having to pass it on fully in prices. And when you start seeing good productivity numbers over and over and over again, that gives you some hope that can continue.
What are you hearing from businesses about the other side of your mandate, employment? Obviously, we're seeing low hire, low fire continue.
