Jobs and Unemployment (from the New York Times): U.S. Added 216,000 Jobs in December, Outpacing Forecasts-Hiring has throttled back from 2021 and 2022, but last year’s growth was still impressive by longer-term standards.
The U.S. labor market ended 2023 with a bang, gaining more jobs than experts had expected and buoying hopes that the economy can settle into a solid, sustainable level of growth rather than fall into a recession.
Employers added 216,000 jobs in December on a seasonally adjusted basis, the Labor Department reported on Friday. The unemployment rate was unchanged at 3.7 percent.
Although hiring has slowed in recent months, layoffs remain near record lows. The durability of both hiring and wage gains is all the more remarkable in light of the Federal Reserve’s aggressive series of interest rate increases in the past couple of years. But a range of analysts warns that the coast is not yet clear and says the effects of those higher rates will take time to filter through business activity.
Financial commentary in the past year has been dominated by dueling narratives about the economy. Most economists warned that the Fed’s driving up borrowing costs at a historically rapid pace would send the economy into a downturn. Heading into 2023, over 90 percent of chief executives surveyed by the Conference Board said they were expecting a recession. And many leading analysts thought that price increases could soften only if workers experienced significant job losses.
But the resilience of the overall economy and consumer spending has so far defied that outlook: In June 2022, inflation was roughly 9 percent. Inflation has since tumbled to 3 percent while the unemployment rate has been largely unmoved.
Altogether, the U.S. economy added roughly 2.7 million jobs over the past year. That’s a smaller gain than in 2021 or 2022. Yet the 2023 increase was larger than those in the late 2010s and represented the fifth strongest year for job growth since 2000.
Consumer Spending (from the New York Times): Despite lingering inflation, Americans increased their spending this holiday season, early data shows. That comes as a big relief for retailers that had spent much of the year fearing the economy would soon weaken and consumer spending would fall.
Retail sales from Nov. 1 to Dec. 24 increased 3.1 percent from a year earlier, according to data from Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment. The numbers, released Tuesday, are not adjusted for inflation.
Spending increased across many categories, with restaurants experiencing one of the largest jumps, 7.8 percent. Apparel increased 2.4 percent, and groceries also had gains.
The holiday sales figures, driven by a healthy labor market and wage gains, suggest that the economy remains strong. The Federal Reserve’s campaign to rein in high inflation by raising interest rates over the last few years has slowed the economy, but many economists believe a so-called soft landing is within reach.
“What we’re seeing during this holiday season is very consistent with how we’re thinking about the economy, which is that it’s an economy that is still very much expanding,” said Michelle Meyer, Mastercard’s chief economist.
What is inflation? Inflation is a general increase in prices, which will cause a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
Still, spending in categories like electronics and jewelry declined this season. And the rate of growth in spending has moderated from the last couple of years. In 2022, retail sales during the holiday season increased 5.4 percent, according to the National Retail Federation. In 2021, they rose 12.7 percent, the largest percentage increase in at least 20 years. Online sales growth has also slowed in 2023, increasing 6.3 percent compared with 10.6 percent from 2021 to 2022, according to Mastercard.
While the economy is strong overall, Americans are being more mindful of how they’re spending, and that discretion shaped the shopping season.
Some retailers had expressed concerns in recent months that shoppers appeared glum and fearful about the economy. Walmart and Target noted that shoppers seemed to be waiting for sales before buying, a change from recent years, when they spent more freely.
“The caution that they’ve taken on their spend and where they’re spending has been really noticeable in the second half of the year, where a lot of customers have been affected, especially lower-income and middle-income” people, said Jessica Ramírez, a retail research analyst at Jane Hali & Associates.
In a return to some of the trends that prevailed before the pandemic, many retailers and brands offered promotions. Discounts were in the 30 to 50 percent range, Ms. Ramírez said. But the discounts were more targeted this year than last because fewer companies were saddled with gluts of inventory.
Retail sales this holiday season increased from a year earlier, though at a slower pace than last year.Credit...Maansi Srivastava/The New York Times
People going up and down the escalator at a Uniqlo store.
The categories that have faced falling sales this year — like electronics, home furnishings and toys — saw some of the biggest discounts leading up to Christmas. Those goods had enjoyed booming sales during the pandemic.
Inflation (from the Financial Times): German inflation rises to 3.8% in blow to rate cut hopes-German inflation accelerated to its fastest rate for three months in December, casting doubt over investors’ hopes that the European Central Bank will start cutting interest rates as early as March.
However, Eurozone inflation rose to 2.9 per cent in December-Eurozone inflation rose to 2.9 per cent in December, reversing six months of consecutive falls and raising questions over how soon the European Central Bank will start cutting interest rates.
From the New York Times: Will America’s Good News on Inflation Last?-One of the biggest economic surprises of 2023 was how quickly inflation faded. A dig into the details offers hints at whether it will last into 2024.
Prices climbed rapidly in 2021 and 2022, straining American household budgets and chipping away at President Biden’s approval rating. But inflation cooled in late 2023, a spurt of progress that happened more quickly than economists had expected and that stoked hopes of a gentle economic landing.
Now, the question is whether the good news can persist into 2024.
As forecasters try to guess what will happen next, many are looking closely at where the recent slowdown has come from. The details suggest that a combination of weaker goods prices — things like apparel and used cars — and moderating costs for services including travel has helped to drive the cooldown, even as rent increases take time to fade.
Taken together, the trends suggest that more disinflation could be in store, but they also hint that a few lingering risks loom.
COVID (from the New York Times):JN.1 Now Accounts for Nearly Half of U.S. Covid Cases- Here’s what to know about the coronavirus variant, which was first deteced in the United States in September.
As the holiday season winds down and Covid-19 cases start to pick up, a variant called JN.1 has now become the most common strain of the virus spreading across the United States.
JN.1, which emerged from the variant BA.2.86 and was first detected in the United States in September, accounted for 44 percent of Covid cases nationwide by mid-December, up from about 7 percent in late November, according to data from the Centers for Disease Control and Prevention.
To some extent, this jump is to be expected.
JN.1’s momentum this month suggests that it may be more transmissible or better at evading our immune systems than other variants currently circulating, according to a C.D.C. report published Dec. 22. The agency said that Covid remains “a serious public health threat,” especially for those who have always been at high risk of severe disease, such as older adults, infants, people with compromised immune systems or chronic medical conditions and those who are pregnant.
As far as experts can tell, JN.1 does not seem to be causing severe illness in most other people, though even a mild case can still make you feel “quite miserable for three or four days. The symptoms of a JN.1 infection are similar to those caused by previous Covid variants, including a cough, fever, body aches and fatigue.
To protect yourself against infection and severe disease, experts continue to recommend wearing masks, improving ventilation indoors when possible, staying home when sick and getting the latest Covid vaccine.
Preliminary research shows that the updated Covid vaccines released in September produce antibodies effective against JN.1, which is distantly related to the XBB.1.5 variant that the vaccines were designed to target. People may not build up as many antibodies to JN.1 as they would to XBB.1.5, but the levels should still decrease the risk.
Rapid tests also continue to be a valuable tool, and the C.D.C. has said tests already on the market work well at detecting JN.1.
There are signs that Covid cases are once again creeping up. There were just under 26,000 hospitalizations due to Covid the week of Dec. 10, a 10 percent increase from about 23,000 hospitalizations the week prior. But Covid hospitalizations are still far lower than they were during the peak of the first Omicron wave in January 2022, and so far only about half as high as they were during the peak of the tripledemic last winter, when Covid-19, flu and R.S.V. cases all surged at the same time.