The Daily Dish
January 16, 2025
Two Economic News Updates
Yesterday yielded two more insights into the current economic conditions. The Bureau of Labor Statistics’ report on the December Get the latest economic insights in today’s Daily Dish from the American Action Forum, featuring updates on labor market trends and the December Consumer Price Index data. (CPI) indicated that the top-line CPI rose 0.4 percent in December, and 2.9 percent over the year since December 2023. The 2.9-percent inflation rate is up 0.2 percentage points over November, largely due to a sharp upturn in energy prices.
The core (non-food, non-energy) price index told a very different story, however. It rose 0.2 percent in December, and the year-over-year inflation rate declined from 3.3 percent in November to 3.2 percent. In particular, shelter inflation continued to abate, falling another 0.1 percentage points to 4.6 percent.
On the whole, this was more of the same. Core inflation has been in the same 3.2–3.4 percent range for more than six months, while top-line inflation has remained below 3 percent.
Yesterday afternoon, the Federal Reserve released the most recent Beige Book. Recall that: “The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety of mostly qualitative information, gathered directly from each District’s sources.”
What do we learn from asking regional businesses about the economic outlook? “Economic activity increased slightly to moderately across the twelve Federal Reserve Districts in late November and December.” That is worth thinking about. The economy was probably growing at or above a 3.0-percent pace as it entered the 4th quarter and this suggests growth went up further as the quarter progressed. Since most estimates of the trend U.S. growth rate are 2.0 percent or lower, this foreshadows a slowing of growth somewhere in 2025.
What about the all-important labor market?
Employment ticked up on balance, with six Districts reporting a slight increase and six reporting no change. Contacts in several service industries, notably healthcare, continued to see job growth. Construction employment increased slightly, while manufacturing employment was flat. Contacts across multiple sectors noted difficulty finding skilled workers, and reports of layoffs remained rare. However, contacts in some Districts expressed greater uncertainty about their future staffing needs. Wage growth picked up to a moderate pace in most Districts, though there were some reports that wage pressures had eased.
This is nearly identical to the summary in Eakinomics earlier this week.
Once more, the information is consistent with a strong near-term outlook that is full of policy risks. (Indeed, it was interesting for the Fed to include in the Beige Book: “Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases.”) Only when these policy risks are resolved will the near-term outlook become clearer.
Fact of the Day
A proposed rule from HHS on HIPAA cybersecurity protections is estimated to impose $32 billion in total costs.
