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Economic Commentary

Economic Commentary – January 13, 2025

January 13, 2025

It should be a doozy of a week.  Financial markets are continuing to digest the extremely strong US nonfarm employment numbers from Friday while contemplating the release of a full load of inflation data.  Strong economic growth going into the first quarter seems well established, although, in truth, the announcement of 256,000 jobs created in December raises more questions than answers; labor force participation remained unchanged at 62.5%, and average hourly earnings grew 0.3%, down from 0.4% in November. It is unclear how this economy is posting these kinds of numbers except through immigration and unappreciated increases in labor force productivity. The one thing that makes sense is that labor growth is predominantly in consumer goods and services.  Despite well-documented consumer anger about inflation, the wage numbers continue to tell the story of increasing consumer spending power, with wages growing 4.3% in the fourth quarter of 2024 compared to inflation estimated at 2.7%-3.0%.  It is now highly unlikely that the Federal Reserve will cut interest rates until later this year. Still, the forthcoming inflation numbers for December will be a critical influence on Federal Reserve commentary that may or may not roil investors in the short term.  And the Fed may not really be the important issue at the moment; bond markets will be paying close attention as well, and 10-year Treasury yields are increasingly dictating the pace and the risks of economic events.

Data to Watch:

  1. US Producer Price Index  (PPI) for December, released Tuesday, January 14.
  2. US Consumer Price Index (CPI) for December, released Wednesday, January 15
  3. US Building Permits for December, released Friday, January 17.

Suggested Reading:

  1. US longshoremen reach tentative deal with ports and shippers to avert strike
  2. China’s imports post surprise growth in December; exports beat expectations as higher tariffs loom
  3. Their Wealth Is in Their Homes. Their Homes Are Now Ash.

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