Markets are ignoring a hotter-than-expected inflation report and instead turning their attention to the latest signs that the U.S. labor market is faltering — a shift in focus that points to growing concern about a deeper economic slowdown.

Consumer prices rose a bit more than expected August, according to CPI data released Thursday by the U.S. Bureau of Labor Statistics. Both the headline rate of 2.9% and the core rate of 3.1% remain solidly higher than the Federal Reserve's 2% target. Normally, that would suggest the U.S. central bank should hold off on interest rate cuts.

But investors barely flinched at the data and instead focused what typically is the lesser-followed weekly initial jobless claims from the Department of Labor. That data showed claims soaring to 263,000 last week — t

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