Inflation (from the New York Times): Prices Are More Stubborn Than Expected-Consumer prices rose 3.1 percent in the year through January, only a slight moderation from the previous month. Excluding food and energy, “core” prices held roughly steady.
Inflation cooled less than expected in January and showed worrying staying power after stripping out volatile food and fuel costs — a reminder that bringing price increases under control remains a bumpy process.
The overall Consumer Price Index was up 3.1 percent from a year earlier, which was down from 3.4 percent in December but more than the 2.9 percent that economists had forecast. That figure is down from the latest peak of 9.1 percent in the summer of 2022.
Food inflation accelerated slightly in January compared with the month before. Grocery prices rose 0.4 percent, an increase from 0.1 percent in December. The cost of dining out rose 0.5 percent, a faster rate than the month before. But versus last year, food prices overall were up 2.6 percent, slightly down from the rate in the year through December.
Egg prices climbed 3.4 percent in January from the month before, a slower rate than 3.7 percent in December but up from 2.6 percent in November. A resurgence of avian flu has contributed to the uptick in prices, economists said, with outbreaks recently hitting commercial poultry farms in several states.
A lot of the heat in January inflation data came from services. Medical care, car insurance and airline fares all saw significant increases. Prices of physical goods, on the other hand, continued to moderate, and in some cases are falling outright.
A Key Inflation Gauge Came In Hotter Than Expected Last Month- Overall prices cooled slightly from a year earlier, but the report included worrying signs for the Federal Reserve.
Inflation cooled less than expected in January and showed worrying staying power after volatile food and fuel costs were stripped out — a reminder that bringing price increases under control remains a fraught, bumpy process.
The overall Consumer Price Index was up 3.1 percent from a year earlier, which was down from 3.4 percent in December but more than the 2.9 percent that economists had forecast. That figure is down from the latest peak of 9.1 percent in the summer of 2022.
But after stripping out food and fuel, which bounce around in price from month to month, “core” prices held roughly steady on an annual basis, climbing 3.9 percent from a year earlier. The measure jumped by the most in eight months on a monthly basis.
American consumers, the White House and Federal Reserve officials had welcomed a recent moderation in inflation. Central bankers in particular are likely to take the fresh report as a reminder that they need to remain cautious. Policymakers have been careful to avoid declaring victory over inflation, insisting that they needed more evidence that it was coming down sustainably.
Jobless claims fall again as market powers on (from the LA Times and Associated Press): The number of Americans applying for jobless benefits fell to its lowest level in five weeks, even as more high-profile companies announce layoffs.
Applications for unemployment benefits fell to 201,000, down 12,000, for the week that ended Feb. 17, the Labor Department reported Thursday.
The four-week average of claims, a less volatile measure, fell to 215,250, down 3,500 from the previous week.
Weekly unemployment claims are broadly viewed as representative of the number of U.S. layoffs in a given week. They have remained at historically low levels in recent years, despite efforts by the U.S. Federal Reserve to cool the economy.
The Federal Reserve raised its benchmark borrowing rate 11 times beginning in March 2022 in an effort to bring down the four-decade-high inflation that took hold after the economy roared back from the COVID-19 recession of 2020.
Many economists expected the rapid rate hikes to weaken the labor market and potentially tip the country into recession, but that hasn’t happened. Jobs have remained plentiful and the economy has held up better than forecast thanks to strong consumer spending.
U.S. employers delivered a stunning burst of hiring to begin 2024, adding 353,000 jobs in January in the latest sign of the economy’s continuing ability to shrug off high interest rates.
Last month’s job gain — roughly twice what economists had predicted — topped the December gain of 333,000, a figure that was revised sharply higher. The unemployment rate stayed at 3.7%, and has been below 4% for 24 straight months, the longest such streak since the 1960s.
Though layoffs remain at low levels, there has been an uptick in job cuts recently across technology and media. Google parent company Alphabet , EBay , TikTok , Snap and the Los Angeles Times have all recently announced layoffs. Last week, Cisco Systems announced it was cutting 4,000 jobs .
Outside of tech and media, UPS , Macy’s and Levi’s also recently cut jobs. In total, 1.86 million Americans were collecting jobless benefits during the week that ended Feb. 10, a decrease of 27,000 from the previous week.
Retail sales fall 0.8% in January after a strong holiday season from the Associated Press/La Times: THE SALES data could encourage the Federal Reserve to finally start cutting interest rates, bringing relief to shoppers and companies. By Anne D’Innocenzio
Americans pulled back their spending more than expected in January after the traditional holiday season splurge.
Retail sales fell 0.8% in January from the strong pace in December when they rose a revised 0.4%, according to the Commerce Department’s report Thursday.
Excluding sales at auto dealerships and gas stations, sales were down 0.5%.
The decline was bigger than the 0.1% drop that economists expected and marked the lowest monthly figure since March of last year.
Economists attributed part of the pullback to snowy weather conditions, but they also said the slowdown shows that shoppers may finally be buckling under higher interest rates and other financial hurdles and that the economic momentum from the end of 2023 could be starting to fade.
Excluding autos, gas, building materials and restaurant meals, the so-called control group of sales — which is used to calculate economic growth — fell 0.4% in January. Economists expected an increase.
The retail sales report could offer positive news that the Federal Reserve could finally start to cut rates, bringing relief to shoppers and businesses seeking lower rates for borrowing.
Despite higher borrowing costs and elevated prices, household spending continues to be fueled by a strong job market and rising wages.
There was another surprising burst of hiring to start off 2024 as employers added 353,000 jobs in January, more evidence that the highest interest rates in two decades, intended to slow the economy, have yet to take hold.
But last month’s slowdown was widespread as shoppers cut back their spending in nine of 13 categories.
Business at clothing and accessory stores was down 0.2%, while sales at health and personal care stores fell 1.1%. Sales at building material and garden supply stores fell 4.1%, reflecting bad weather. Business at general merchandise stores was unchanged. Online sales fell 0.8%. But a solid gain at restaurants showed that spending on services remains sturdy, analysts said.
Consumer inflation in the United States cooled last month yet remained high, and the U.S. reported this week that the consumer price index rose 0.3% from December to January. Compared with a year earlier, prices are up 3.1%.
That’s far below the 9.1% inflation peak in mid-2022 , but above the Fed’s 2% target level, making it a possibly pivotal issue in President Biden’s bid for reelection.
The government’s monthly retail sales report offers only a partial look at consumer spending; it doesn’t include many services, including healthcare, travel and hotel lodging.
Jobs (and Economists) from the New York Times: Three Lessons From a Surprisingly Resilient Job Market - The recovery from the pandemic lockdowns has prompted economists to consider whether their playbook is outdated or just missing a page.
The pandemic created an economic crisis unlike any recession on record. So perhaps it shouldn’t be surprising that the aftermath, too, has played out in a way that almost no economists expected.
When unemployment soared in the first weeks of the pandemic, many feared a repeat of the long, slow rebound from the Great Recession: years of joblessness that left many workers permanently scarred. Instead, the recovery in the labor market has been, by many measures, the strongest on record.
In early 2021, some economists foresaw a surge in inflation. Others were skeptical: Similar predictions in recent years — in some cases from the same forecasters — had failed to come true. This time, however, they were right.
And when the Federal Reserve began trying to tamp down inflation, there were warnings that the job market was sure to buckle, as it had threatened to do every time policymakers began raising interest rates too rapidly in the decade before the pandemic. Instead, the central bank has raised rates to their highest level in decades, and the job market is holding steady, or perhaps even gaining steam.
The final chapter on the recovery has not been written. A “soft landing” is not a done deal. But it is clear that the economy, particularly the job market, has proved far more resilient than most people thought probable.
Interviews with dozens of economists — some of whom got the recovery partly right, many of whom got it mostly wrong — provided insights into what they have learned from the past two years, and what they make of the job market right now. They didn’t agree on all the details, but three broad themes emerged.
1. This time really was different.
Economists have learned to be wary of concluding that “this time is different.” No matter how different the specifics, the basic laws of economic gravity tend to hold constant: Bubbles burst; debts come due; patterns of hiring and firing evolve in ways that are broadly, if imperfectly, predictable.
But the pandemic recession really was different. It wasn’t caused by some fundamental imbalance in the economy, like the dot-com bubble in the early 2000s or the subprime mortgage boom a few years later. It was caused by a pandemic that forced many industries to shut down virtually overnight.
The response was different, too. Never had the federal government provided so much aid to so many households and businesses. Despite mass unemployment, personal incomes rose in 2020.
The result was a recovery that was fast but chaotic. When vaccines enabled people to venture out again, they had money to spend, but businesses weren’t ready to let them spend it. They had shed millions of workers, some of whom had moved on to other cities or industries, or had started businesses of their own, or who weren’t available to work because schools remained closed or the health risks still seemed too great. Companies had to navigate supply chains that remained snarled long after daily life had returned mostly to normal, and they had to adjust their business models to schedules, spending patterns and habits that had shifted during the pandemic.
Unemployment usually rises when job openings fall. Not this time.
Notes: Job openings are shown as a share of employment. Unemployment is shown as a share of the labor force. All data is seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York Times
In retrospect, it seems obvious that normal economic rules might not apply in such an environment. Ordinarily, for example, when job openings fall, unemployment rises — with fewer opportunities available, it is harder to find work. But coming out of the pandemic shutdowns, even after the initial hiring rush slowed, there were still more vacancies than workers to fill them. And companies were eager to hold on to the employees they had worked so hard to hire, so layoffs remained low even when demand began to cool.
Some economists did recognize that the pandemic economy was likely to follow different rules. Christopher J. Waller, a Fed governor, argued in 2022 that job openings could fall without necessarily driving up unemployment, for example. But many other economists were slow to acknowledge the ways in which standard models didn’t apply to the pandemic economy.
“It’s the danger of forecasting what’s going to happen in extreme times from linear relationships estimated in normal times,” said Laurence M. Ball, a Johns Hopkins economist. “We should have known that.”
2. The job market is returning to normal — and normal is pretty good.
The job market doesn’t look so strange anymore. In fact, it looks largely as it did just before the pandemic began. Job openings are a bit higher than in 2019; job turnover is a bit lower; the unemployment rate is almost the same.
The good news is that 2019 was a historically strong labor market, marked by gains that cut across racial and socioeconomic lines. The 2024 version is, by some measures, even stronger. The gap in unemployment between Black and white Americans is near a record low. Job opportunities have improved for people with disabilities, criminal records and low levels of formal education. Wages are rising for all income groups and, now that inflation has cooled, are outpacing price increases.
The racial unemployment gap is narrowing
“Normal” looks a bit different five years later, of course. The pandemic drove millions of people into early retirement, and many have not returned to work. The persistence of remote and hybrid work has hurt demand for some businesses, like dry cleaners, and shifted demand for others, like weekday lunch spots, from cities to the suburbs.
But while those patterns will continue to evolve, the period of frantic rehiring and reallocation is largely over. Workers are still changing jobs, but they are no longer walking out the door on their lunch break to take a better-paying opportunity down the street. Employers still complain that it is hard to hire, but they are no longer offering signing bonuses and double-digit pay increases to get people in the door.
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As a result, many economic rules that went out the window earlier in the recovery may again be relevant. Without such an excess of unfilled jobs, for example, a further decline in openings may really augur an increase in unemployment. That doesn’t mean the old models will perform perfectly, but they may again bear watching.
“You can easily imagine that we had a period where, man, a lot of weird things happened, but now we’re coming back to a world we understand,” said Guy Berger, director of economic research at the Burning Glass Institute, a labor market research organization.
3. The good times don’t have to end (necessarily).
A few years after the end of the Great Recession, many economists began warning that the United States would soon run out of workers.
Employment had surpassed its pre-recession peak. The unemployment rate was approaching 5 percent, a level many economists associated with full employment. Millions of people had abandoned the labor force during the recession, and it was unclear how many wanted jobs, or could get one if they tried. The nonpartisan Congressional Budget Office estimated in early 2015 that job growth would soon slow to a trickle, just enough to keep up with population growth.
Job growth has far surpassed prepandemic expectations
Those projections proved wildly pessimistic. U.S. employers added more than 11 million jobs from the end of 2014 to the end of 2019, millions more than what the budget office had expected. Companies hired job seekers they had long shunned, pushing the unemployment rate to a 50-year low, and raised wages to attract people off the sidelines. They also found ways to make workers more productive, allowing businesses to keep growing without adding as many employees.
It is possible that if the pandemic hadn’t happened, the job growth of the preceding years would eventually have petered out. But there is little evidence that was an imminent prospect in 2020, and there’s no reason it has to happen in 2024.
“A strong labor market sets off a virtuous cycle, where people have jobs, they buy stuff, companies do well, they hire more people,” said Julia Pollak, chief economist for the job site ZipRecruiter. “It takes something to slow that train and interrupt that cycle.”
Some sort of interruption is possible. The Fed, nervous about inflation, could wait too long to start cutting interest rates and cause a recession after all. And recent data may have overstated the job market’s strength — economists point to various signs that cracks could be forming beneath the surface.
But pessimists have been citing similar cracks for well over a year. So far, the foundation has held.
Japan’s Economy Slips Into Recession and to No. 4 in Global Ranking from the New York Times: A slowdown in consumer and business spending held Japan back at the end of last year, with the economy contracting for the second straight quarter.
The Japanese economy contracted at the end of last year, defying expectations for modest growth and pushing the country into a recession.
Japan’s unexpectedly weak economy in the fourth quarter was the result of a slowdown in spending by businesses and consumers who are grappling with inflation at four-decade highs, a weak yen and climbing food prices.
The end of the year also marked a moment that had been expected: Japan’s economy, now slightly smaller than Germany’s, fell one notch to become the world’s fourth-largest economy.
On an annualized basis, gross domestic product fell 0.4 percent in October through December after a revised 3.3 percent decline in the previous three-month period. Economists had been forecasting fourth-quarter growth of around 1 percent.
C.D.C. Considers Ending 5-Day Isolation Period for Covid (from the New York Times): Americans may be advised that it’s safe to return to regular routines after one day without a fever.
The Centers for Disease Control and Prevention is considering loosening its recommendations regarding how long people should isolate after testing positive for the coronavirus, another reflection of changing attitudes and norms as the pandemic recedes.
Under the proposed guidelines, Americans would no longer be advised to isolate for five days before returning to work or school. Instead, they might return to their routines if they have been fever free for at least 24 hours without medication, the same standard applied to the influenza and respiratory syncytial viruses.
The proposal would align the C.D.C.’s advice with revised isolation recommendations in Oregon and California. The shift was reported earlier by The Washington Post, but it is still under consideration, according to two people with knowledge of the discussions.