Category Archives: Economic Indicators

U.S. economy adds 216,000 jobs in December, ending 2023 with a bang

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https://www.axios.com/2024/01/05/us-jobs-report-december-2023

The U.S. economy added 216,000 jobs last month while the unemployment rate held at 3.7%, the Labor Department said on Friday.

Why it matters: 

The final snapshot of the 2023 labor market shows hot hiring — the latest sign that the American job market continues to defy expectations of a slowdown.

  • The figure is well-above the roughly 170,000 jobs economists expected.

The big picture: 

The Federal Reserve has hinted it likely won’t raise interest rates again with encouraging signs that inflation is easing and the labor market is cooling.

  • That concludes an aggressive rate hiking cycle that began in 2022 and lasted through much of last year.

For now, however, there is little evidence those rate hikes translated into pain for workers in 2022.

  • American consumers, however, remain dissatisfied with the economy — a problem that may continue to weigh on the Biden White House as the 2024 election heats up.

Details: 

Friday’s jobs report shows the labor market stayed strong. Hiring increased in sectors including government, health care, and construction. Transportation and warehousing shed jobs.

  • Average hourly earnings, a measure of wages, rose by 0.4% last month. Compared to the prior year, average hourly earnings rose 4.1%.
  • The share of the population with in the labor force — that is, with a job or looking for one — was 62.5% in December, roughly 0.3 percentage point less than the prior month.
  • The Labor Department also said the economy added a combined 71,000 fewer jobs than initially estimated in October and November.

The bottom line: 

The hotter-than-expected jobs figures are one of several more key economic reports due before Federal Reserve officials meet at the end of the month.

Health Sector Economic Indicators Briefs

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https://mailchi.mp/altarum/health-sector-economic-indicators-briefs-august-2023?e=b4c24e7e20

The latest Altarum Health Sector Economic Indicators show that health spending as a percent of GDP has stabilized near 17.5%, health care price growth and economywide inflation recently converged, and the health sector added over 60,000 jobs in July. See the highlights below.

Health spending as a percent of GDP has stabilized at 17.5%

  • In June 2023, national health spending grew by 5.0%, year over year, and now represents 17.5% of GDP, equal to the average percent of GDP for the previous 12 months.
  • Nominal GDP in June 2023 was 5.8% higher than in June 2022, and grew 0.8 percentage points faster than health spending.
  • Neglecting government subsidies, spending on personal health care in June increased by 8.1%, year over year, and by 7.3% when subsidies are included, exceeding the GDP growth rate for the fifth consecutive month.
  • Neglecting government subsidies, year-over-year spending on home health care (12.2%) and nursing home care (12.0%) grew fastest in June, while physician and clinical services spending increased the least (6.9%) among major categories.
  • Personal health care growth (neglecting government subsidies), which continues to be dominated by growth in utilization rather than price increases, has slowed somewhat in the past 4 months.

Health care price growth and economywide inflation finally converge

  • The overall Health Care Price Index (HCPI) increased by 2.7% year over year in July, slowing 0.1 percentage points from the slightly revised rate in June (2.8%).
  • For the first time in over two years, health care price growth exceeded overall inflation as economywide price growth (measured by the GDP Deflator) fell to 2.6% in June, its lowest growth rate since March 2021.
  • In new data for July, overall year-over-year CPI growth actually increased slightly to 3.2%, the first increase in its growth rate since June 2022, driven primarily by changes in commodities price growth.
  • Among the major health care categories, prices for nursing home care (5.5%) and dental care (5.1%) grew fastest, while physician and clinical services (0.7%) price growth was the slowest in July.
  • Year-over-year growth in hospital prices paid by private payers fell nearly 2.5 percentage points over the past two months (from 6.1% in May to 3.7% in July), beginning to converge with public payer price growth. In July, growth in Medicare and Medicaid hospital prices reached 2.6% and 2.3% growth respectively.
  • Our implicit measure of health care utilization growth declined in June, up 4.5% year over year, and down somewhat from slightly revised data (4.9% growth) a month prior.

Health care adds 63,000 jobs in July, the largest increase since July 2022

  • Health care added 63,000 jobs in July 2023, exceeding the average of 43,700 jobs added per month for the first 6 months of the year and the largest monthly increase in the past year.
  • July’s health sector job growth was led by growth in ambulatory care settings, which added 35,400 jobs, followed by hospitals, which added 16,100 jobs.
  • Nursing and residential care facilities added 11,500 jobs in July, with growth occurring in both nursing homes (6,300 jobs) and other nursing and residential care settings (5,200 jobs).
  • The economy added 187,000 jobs in July, somewhat below the 12-month average of 280,200 jobs. The unemployment rate, at 3.5%, changed little in July.
  • Health care wage growth in June 2023 was 3.7% year over year, somewhat below the total private sector wage growth of 4.4%.
  • Wage growth in health care settings is now highest in nursing and residential care, at 4.8% year over year in June 2023. Wage growth in hospitals was 4.3%, while wage growth in ambulatory care settings was 3.0% in June.

Click to access Combined-Altarum-HSEI-Briefs_August_2023.pdf

Inflation’s big cooldown

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The latest CPI was a crowd-pleaser: Inflation has plunged from its peak, helping provide relief for consumers.

  • Beyond the headline, an underlying measure closely watched by economists and the Fed finally began to cool.

Why it matters: 

The worst of the inflation crisis looks to be firmly behind us. Price gains appear to be on a path to returning to normal, but there is huge uncertainty around how long that will take, with plenty of hurdles still ahead.

What they’re saying: 

“After a punishing stretch of high inflation that eroded consumer’s purchasing power, the fever is breaking,” Bill Adams, chief economist at Comerica Bank, wrote in a note.

  • While the Fed appears to be on track to tighten by a quarter percentage point two weeks from today, the promising news lowers the odds of further hikes this year.

Details: 

Headline CPI rose 3% (or 2.97%, unrounded) in the 12 months through June, the smallest increase since March 2021. That reflects milder price gains for a slew of goods, including food — and outright deflation for other items consumers buy, like airline fares, which fell 8% in June.

The intrigue: 

At the same time last year, headline prices skyrocketed by 9%. Now we’re lapping that period, which makes the comparison much more favorable.

  • Then, commodity prices soared on disruptions from Russia’s invasion of Ukraine. Those prices are sharply lower now, helping the headline figure cool rapidly. Gasoline, for instance, is down nearly 27%.
  • Those favorable effects will fade in the year-on-year numbers, so don’t be surprised if the headline CPI figure rebounds some in the coming months.

The most encouraging aspect was the core figure, which strips out volatile food and energy costs and is closely followed by policymakers. That rose by just 0.2% in June, the slowest monthly pace since February 2021.

  • In the past three months, core inflation has risen at a 4.1% annualized pace — down almost a full percentage point from May.
  • Under the hood, there was notable disinflation across a key sector of the economy monitored by the Fed: core services, excluding shelter. Prices in that category were flat last month, compared to a 0.2% rise in May.
  • That cooling is happening alongside a still-healthy labor market and solid wage gains (more on this below), which officials worried could stoke inflation in this category.

The Biden administration is eager to tout the progress. “The economy is defying predictions that inflation would not fall absent significant job destruction,” top White House economic adviser Lael Brainard is expected to say this afternoon at the Economic Club of New York, according to prepared remarks.

  • “Annual inflation has now declined every month for 12 months in a row,” she will say, “and inflation in the United States is now the lowest among G-7 nations … even as our economic recovery from the pandemic has been the strongest.”

The bottom line: 

We have been head-faked before by what appeared to be remarkable progress on inflation, notably in the summer of 2001.

  • With expected cooling in other areas (including shelter, which makes up a big chunk of the index), there is reason to be hopeful this progress could be here to stay.

America’s inflation turnaround

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It may be time to update your inflation narrative.

The ultra-hot readings that defined the first half of 2022 appear to be firmly in the rearview mirror, improving the odds that price pressures can dissipate further without excessive economic pain.

  • That’s the key takeaway from the December Consumer Price Index released this morning, which confirmed notably cooler inflation as the year came to a close.

Why it matters: 

The nation’s inflation problem isn’t over, but so far inflation is slowing while the job market is still healthy, an enviable combination.

  • As Princeton economist Alan Blinder put it in an op-ed last week, inflation was “vastly lower” in the second half of 2022 than the first; yet, “hardly anyone seems to have noticed.”

By the numbers: 

In the final three months of 2022, core inflation (which excludes food and fuel costs) came in at an annualized 3.1% — higher than the Fed aims for, but hardly crisis levels. In the second quarter of the year, that number was 7.9%.

  • It’s a stunning decline, occurring alongside a labor market that by nearly all measures is still flourishing. Just this morning, the Labor Department announced that jobless claims fell to an ultra-low 205,000 last week.

State of play: 

Grocery prices rose 1.1% in the final three months of the year, an uncomfortably high rate, but not as extreme as the rates seen earlier in 2022.

  • Gasoline prices, pushed up by Russia’s invasion of Ukraine, were once the crucial reason why inflation was rising. In recent months, the opposite has been true: December pump prices slid 9.4%, helping drag the overall index into negative territory.
  • Disinflation was at work for many other goods, including used cars (-2.5%) and new vehicles (-0.1%) where prices have reversed, helped by easing supply chain bottlenecks.
  • Shelter costs pushed inflation upward, surging 0.8% in December. But private-sector data points to rents on new leases falling in recent months, which would only filter into the CPI data over time. That makes for a more benign inflation outlook in 2023.

What to watch: 

That’s not to say there aren’t risks ahead. The war in Ukraine is ongoing, and another energy price shock could occur.

  • The Fed has also focused in on the services sector, where price increases have slowed from last summer but remain frothy. The risk is that business costs associated with the still-tight labor market (like higher wages) will pass through to prices for consumers.

The bottom line: 

Inflation will still be a worry in 2023, but much less so than it seemed a few months ago.

Consumer prices fell in December as inflation continues to cool

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https://www.axios.com/2023/01/12/consumer-inflation-december?stream=top&utm_source=alert&utm_medium=email&utm_campaign=alerts_all

U.S. consumers got a reprieve from soaring costs in December: the Consumer Price Index declined on a monthly basis, the first drop since last summer as falling prices for items including gasoline and used cars dragged the overall index down.

By the numbers:

The index, which captures price changes across a basket of consumer goods and services, fell 0.1%, following an increase by the same amount in November. Over the past 12 months ending in December, the index is up 6.5%, falling from 7.1% through November.

  • Core CPI, which excludes food and fuel costs, rose by 0.3% last month. Over the last 12 months through December, the index rose 5.7%. In November, those figures were 0.2% and 6%, respectively.

Why it matters:

The hot inflation that persisted through much of last year continues to show signs of receding — offering at least some relief for shoppers, the White House and the Federal Reserve, though some underlying inflation pressure remains.

Where it stands:

The data caps a year in which consumer prices rose rapidly, though the pace of cost increases began to slow in the final months of the year.

  • As consumers shifted spending and supply chains began to heal, price increases for a range of goods have cooled or, in some cases, costs have fallen outright.

Between the lines:

The Federal Reserve, which has been raising interest rates aggressively to tame inflation, is watching the services sector closely, where inflation can be more challenging to stamp out.

  • A sub-index measuring price moves within the services category (excluding housing) accelerated by 0.4%, after two straight months of cooler readings
  • Still, in the 12 months through December, this sub-index is up 7.4% (compared to 7.3% in November).

A superb jobs report

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We really liked what we saw in the December jobs report, which made us more optimistic about the possibility the 2023 economy will hold up reasonably well. More details below.

  • Situational awareness: In less optimistic news, the Institute for Supply Management’s survey of service industry activity plunged in December, to 49.6% — down from 56.5% in November. This is the first time the index has been in negative territory since May 2020.

The U.S. labor market is extraordinarily strong, despite gloom-and-doom economic forecasts and high-profile layoffs.

  • That is the takeaway from December numbers, out this morning, that were outstanding in subtle and not-so-subtle ways.

Why it matters: If America’s economy is going to come in for a soft-landing — inflation dissipating without mass unemployment — you would expect to see numbers that look a lot like last month’s.

  • The economy continues to add a healthy number of new jobs, though the pace is moderating. Wages are rising, but not so quickly as to alarm economic policymakers. And more workers are entering the labor force, which — if sustained — could heal labor shortages.
  • The data has positive developments both for American workers — who continue to have abundant job opportunities — and for Fed officials seeking evidence that their inflation-fighting efforts are starting to cool job creation and wage growth to more sustainable rates.

The headline unemployment rate, at 3.5%, matched its lowest levels in decades. If you extend the calculation out a couple more decimal places, University of Michigan economist Justin Wolfers points out, it was 3.468%, the lowest since 1969!

  • It fell even as the labor force expanded by 439,000 workers, a welcome development on the supply front after months of little progress. More Americans working means fewer of the labor shortages that have contributed to inflation.
  • An additional 717,000 Americans reported being employed, helping resolve what had been a puzzling disconnect between different sources of labor market data — and in a positive direction.
  • A stunningly low jobless rate might raise some alarm bells at the Fed over the possibility the job market is too tight, and that this could fuel inflation. But the labor force growth and benign wage data (more on that below) may take the edge off those fears.

By the numbers: Employers are still hiring at a rapid pace — 223,000 in December — but slowing from early last year’s unsustainable numbers.

  • The economy has added roughly 247,000 jobs per month on average in the last three months, slower than the 366,000 in the prior three-month stretch, and less than half of the 539,000 jobs added each month in Q1 2022.
  • Evidence of tech layoffs did show up somewhat in the report, with the information sector shedding 5,000 jobs. Temporary help services employment fell by 35,000, the clearest sign employers are paring back demand for workers.
  • But most other sectors, including leisure and hospitality, construction and health care, continued to add jobs.

The bottom line: If we keep getting numbers like these, 2023 may not be such a rough year for workers after all.

Inflation cools in November for the second-straight month

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https://www.axios.com/2022/12/13/inflation-consumer-prices-november?stream=top&utm_source=alert&utm_medium=email&utm_campaign=alerts_all

Following a cooler-than-expected inflation reading in October, consumer price gains slowed even further last month: the Consumer Price Index rose 7.1% in the year ending in November, down from 7.7% the prior month, the Labor Department said on Tuesday.

Why it matters: Inflation is still way too high, but the data offers some hope that it can ease alongside a still-healthy economy.

By the numbers: On a monthly basis, CPI rose 0.1%, slower than the 0.4% in October.

  • Core CPI, which strips out volatile food and energy costs, also continued to ease. On a monthly basis, it rose 0.2% — up 6% over the 12 months ending in November.
  • In October, those figures were 0.3% and 6.3%, respectively.

Where it stands: The Federal Reserve has raced to try to get inflation under control, raising interest rates at a historic clip — moves that risk throwing the economy into a recession.

  • Officials will likely raise rates by a smaller (but still historically huge) amount following a two-day policy meeting that concludes on Wednesday.
  • That will come after surprisingly cooler inflation readings, though officials have warned that its war on inflation is far from over.

Inflation cools more than expected in October

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https://www.axios.com/2022/11/10/cpi-inflation-october?stream=top&utm_source=alert&utm_medium=email&utm_campaign=alerts_all

The Consumer Price Index cooled more than expected in October: it rose 7.7% from a year earlier, down from 8.2% the prior month, the Labor Department said on Thursday.

Why it matters: Inflation still remains painfully high, but a bigger-than-expected easing in price pressures for items like used cars and apparel helped pull the overall index down.

By the numbers: On a monthly basis, CPI rose 0.4%, the same pace as September.

  • Core CPI, a closely watched gauge that strips out volatile food and energy costs, eased in October. On a monthly basis, it rose 0.3% — up 6.3% from a year ago.
  • In September, those figures were 0.6% and 6.6%, respectively.

Catch up quick: Soaring costs have eroded many Americans’ wage gains, souring their view on the economy that has otherwise held up.

  • Supply chain problems have led to shortages of vehicles and other consumer goods, which pushed up prices. Russia’s invasion of Ukraine has created a volatile backdrop for energy costs.
  • Those supply chain pressures have eased and consumers have dialed back demand for goods, pushing prices down. But costs for services have raced ahead.

Where it stands: The Fed has raced to try to get inflation under control, raising interest rates at a historic clip.

  • In recent months, inflation data has surprised to the upside. That’s kept officials on an aggressive path to slow the economy down, with the hope inflation will follow suit. Those moves have risked throwing the economy into a recession.

U.S. economy returned to growth in Q3

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The U.S. economy expanded at a 2.6% annual rate in the third quarter, ending the streak of back-to-back contractions that raised fears the country had entered a recession.

Why it matters: Gross domestic product got a boost from trade dynamics, but the underlying details — including weaker housing and decelerating consumer spending — point to an economy that’s slowing.

  • The first estimate of GDP, released by the Commerce Department on Thursday, will be revised in the coming months as the government gets more complete data.
  • The report comes on the heels of negative GDP growth during the first half of the year. In the January through March period, the economy contracted at a 1.6% annual rate. In the second quarter, the economy shrank at a 0.6% annualized pace.

Between the lines: The latest GDP report is among the final major economic data releases before the midterm elections, where voters have ranked the economy as a critical issue.

  • The labor market is solid, with the unemployment rate at the lowest level in over 50 years. But soaring inflation has eaten away at Americans’ wage gains.

The backdrop: The Federal Reserve is trying to engineer an economic slowdown in a bid to crush high inflation. It has swiftly raised borrowing costs five times this year, with another big increase likely ahead at its upcoming policy meeting next week.

What they’re saying: “For months, doomsayers have been arguing that the US economy is in a recession and Congressional Republicans have been rooting for a downturn,” President Biden said in a statement. “But today we got further evidence that our economic recovery is continuing to power forward.”

Inflation drops to zero in July due to falling gas prices

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Consumer prices were unchanged in July, as plunging prices for gasoline dragged the Consumer Price Index down to zero. Core inflation, which excludes energy and food, rose only 0.3%, below what analysts expected.

Driving the news: The Labor Department reported that overall consumer prices rose 0% last month, and are up 8.5% over the past year. That compares to a 9.1% year-over-year reported in June.

Why it matters: Falling gasoline prices are clearly giving American consumers some inflation relief, and the broader inflation picture was more favorable in July than economists had expected.

By the numbers: Gasoline prices fell 7.7% in July, dragging down headline inflation. Other items with falling prices included used cars and trucks (-0.4%) and airfares (down 7.8%).

  • But rents kept rising, a major factor in stubbornly high underlying inflation. Renters faced a 0.7% rise in costs.

What’s next: The Federal Reserve has indicated it intends to keep raising interest rates until there is clear evidence inflation is waning. After two straight months of extremely hot inflation readings, this report will be welcome news.