The US economy exhibited a mixed bag of economic indicators in December, reflecting both encouraging signs in the labor market and persistent inflationary pressures. Mortgage rates fell to their lowest level in more than three years, providing potential homeowners with a glimmer of hope. What’s behind inflation Wholesale inflation remained stubbornly high. The Federal Reserve added in their announcement that they’re not planning to cut interest rates at all over the next year.
In December the US economy lost some 50,000 jobs. This rounded out a year that saw the slowest job growth in decades. Job-finding expectations are at record lows, a recent New York Federal Reserve Survey found. This all comes despite the very modest growth under which we were living. Nonetheless, it means that despite the creation of some new jobs, the outlook for job creation continues to be very dark.
The latest inflation figures from December showed prices continued to run at 2.7%. This stark figure highlights the pressure that our economy continues to be under as we all continue to wrestle with high inflationary numbers. Retail sales jumped more than expected in November, a testament to robust end-user demand. Inflation has hurt Americans’ jobs more than their ability to retail shop.
The recent decline in mortgage rates does provide one bright spot for prospective homebuyers. What’s more, rates have fallen to their lowest level in more than three years. This upward trend will encourage even more potential home buyers to enter the market. Trump even made a half-hearted recent threat to prohibit institutional investors from purchasing single-family homes. This ambitious step introduces additional uncertainty to the housing market, with potential repercussions for both demand and pricing.
Adding to the bad economic news, data released Wednesday indicated that wholesale inflation continued to run exceptionally hot in November. Ongoing inflation may suppress whatever economic recovery comes along. It could affect the Federal Reserve’s ongoing discussions about raising interest rates. Many analysts believe that the Fed will continue on its same path. Perhaps most importantly, they’ve concluded that the Fed will not lower interest rates significantly any time soon.
Second, the energy sector remains hugely impactful on the economy’s overall condition. Without a major change in the availability of oil, these realities will continue to drive down energy prices and overall inflation. Use of rare earth minerals are expected to increase by 8 – 15% annually. These critical infrastructure investments foster innovation across industries, especially in tech and renewables sectors.
Even with all the funk in the air December’s job growth is a welcome and positive surprise! It’s therefore important to juxtapose these figures with the general economic landscape. The conflicting cues from retail sales and the impact of rising inflation continue to underscore a convoluted economic dynamic. As consumers navigate rising prices while experiencing a dip in job-finding confidence, the US economy faces a challenging road ahead.