Today's CPI report indicates that lower inflation is probably here for a while. Year-over-year growth in the CPI was just 3.2% in July (see the graph below). This follows on the heals of 3.1% inflation last month.  You can see from the graph that inflation is now back down into its normal range.

The lower inflation reflects the Federal Reserve's commitment to bring inflation down to the 2% target range.  Just one year ago, inflation was 8.4 percent.

Keeping in mind that inflation is the growth rate of the general (overall) price level, it is still interesting to look at changes in some individual prices.  The table below shows a selected few "big movers," or prices that moved a lot in the past year. The last column also gives the weight assigned to these categories in the overall CPI.  Recall that this weight is equivalent to the portion of a typical consumer's monthly budget spent on these categories.

As you can see, gasoline prices fell by almost 20% over the past year and the typical consumer spends about 3.4% of their monthly budget on gasoline. Frozen vegetable prices rose dramatically over the past year, climbing 17.1 percent. 

Today's jobs report brings more strong data and very little change from the past few reports. The unemployment rate (pictured below) remains at historically low levels, falling to 3.5% in July, and jobs growth remains robust, with 187K new jobs added.

On the other hand, the strong unemployment rate is probably overstating the overall health of the labor market.  As we have talked about previously, the labor force participation rate (LFPR) remains at low levels.  You can see in the figure below that the current level (62.6%) is still way below the pre-pandemic level, which was also very low relative to U.S. economic history. 

This low LFPR indicates that there are still millions of potential workers not in the labor force.