Breaking Down the January's Inflation Report

The Consumer Price Index increased 0.3% in January on a seasonally adjusted basis, after rising 0.2% in December, the U.S. Bureau of Labor Statistics reported today. It rose 3.1% compared to January 2023 but decreased from 3.4% in December '24. The fluctuation in CPI sparked different opinions on the Fed's stnace on the interest rate. Many people to believe that the Fed will hold off on cutting down interest rates because it is still higher than their 2% target. 

The decrease in CPI is good news for consumer purchasing power, as real average hourly earnings has risen 1.4% yoy. Energy prices have also decreased by 4.6% in the past year, with gasoline down 6.4%, natural gas 17.8% and fuel oil 14.2%. These reductions in energy costs can provide some relief for households managing their budgets.

While a decrease in prices is great for consumers, a lot of nessicities such as shelter (6% yoy), food (2.6% yoy) increased .A couple significant year-over-year price changes are the prices of frozen, noncarbonated juices and drinks, up 29% since last January. Another large swing is the price of motor vehicle insurance, up 20.6%. 

While the overall decrease in CPI is a positive development for consumers, these significant increases in essneitnal needs emphasise the challenges faced by households in managing their budget. As the Fed carefully monitors inflation and economic indicators, consumers must remain vigilant and change their spending habits accordingly.

January hiring was the lowest for the month on record as layoffs surged

 

In this article, Jeff Cox covers the recent data about the job market. According to a report from Challenger, Gray & Christmas, companies in the United States announced the highest level of planned job cuts in January, since early 2023. The total number of planned layoffs reached 82,307 for the month, marking a significant increase of 136% from December, although still down 20% from the same period last year. This surge in layoffs was observed across various sectors, with technology and finance being the hardest hit.

Companies such as Microsoft, Alphabet, PayPal, Amazon, and UPS announced significant workforce reductions at the beginning of the year. Layoffs in the financial sector totaled 23,238, the highest since September 2018, while the technology sector saw 15,806 job cuts, the highest since May 2023. Additionally, food producers announced 6,656 layoffs, the highest since November 2012, attributed to factors such as rising costs, advancing automation technology, and operational challenges influenced by climate change and immigration policies.

These layoffs were driven by broader economic trends and a strategic shift toward increased automation and AI adoption in various sectors, with cost-cutting cited as a primary driver.

Link to article

Factors Behind U.S. Pandemic Era Inflation

     Inflation has been a topic that's been scrutinized intensively, especially during the pandemic era as unexpected economic shifts have instigated fluctuating prices. In this article by the Brookings Institution, researchers analyze the factors contributing to this. One main factor contributing to this is disruptions in global supply chains, caused by other factors like supply shortages and increased production costs, increasing prices for consumers.

    It also emphasizes on the role of stimulus measures in response to the pandemic, such as unemployment benefits and payments to individuals. Though these measures provided support to help households and businesses, it also increased the amount of inflation in the economy. There was also changes in consumer behavior like increased demand for certain goods/services. The Brookings Institution also analyzes other reasons behind the U.S. pandemic era inflation.

Link to the article: https://www.brookings.edu/articles/what-caused-the-u-s-pandemic-era-inflation/

Potential Impact of Increased Credit Card Payment Delays

During 2023, economists saw a pattern of significant increasing credit card payment delays. Reports showed that it even exceeded 50% with potential financial stress to the economy. We got consumer debt almost $17.5 trillion, credit card debt increased to 14.5%. 

Chief Economist Joseph LaVorgna stated that increasing delay payment and credit debt, especially on auto loans, presents a potential risk to economic overall. The question is that: Does a tightening cycle from the Federal Reserve Bank has any impacts? 

Experts said that the impact of rising interest rates on debt repayments highlights the complicated relationship between monetary policy (from Fed) and borrowing behavior from consumers. 

I think the huge increasing in credit card repayment underscore the need for careful monitoring and effective measures to deal with risks. We should understand the consequences of delayed debt to create a more stable economic environment.

Link: https://www.cnbc.com/amp/2024/02/06/credit-card-delinquencies-surged-in-2023-indicating-financial-stress-new-york-fed-says.html 

U.S. Debt on Pace to Top $54 Trillion Over Next 10 Years

The Congressional Budget Office's recent report underscores the daunting fiscal path facing the United States, with projections indicating a substantial increase in national debt by nearly $19 trillion over the next decade. Despite some positive indicators such as recent spending curtailments and stronger-than-expected economic growth, persistent challenges like an aging population, escalating interest costs, and the budgetary impact of President Biden's clean-energy initiatives continue to strain the nation's finances. While the projected deficits are somewhat smaller than previously estimated, reaching $2.6 trillion annually by 2034, they remain alarmingly high. Of particular concern is the forecasted surge in interest payments, expected to exceed $12 trillion from 2024 to 2034, posing a significant burden on the economy. Both Republican and Democratic lawmakers express apprehension about the escalating debt, emphasizing the need for bipartisan efforts to address the issue. Calls for the establishment of a fiscal commission to propose solutions to stabilize the debt and ensure long-term fiscal sustainability have grown louder, emphasizing the urgency of addressing the nation's fiscal challenges.

https://www.nytimes.com/2024/02/07/business/us-national-debt-congressional-budget-office.html

For First Time in Two Decades, U.S. Buys More From Mexico Than China

     This article highlights the recent changes in who the United states imports the most goods from on a yearly basis. The amount of total goods imported from China decreased by 20% last year. In contrast, the import numbers from Mexico are roughly the same as compared to 2022. Some economists believe that this is because tools such as Covid-19 testing kits and other pandemic related goods are not being traded as much now that the hysteria has started to die down. 

    Other economist believe that the Tariffs the Trump administrated are the reason that the numbers have dipped. It is theorized that the US could be obtaining the same amount of goods from China, but are getting them from other countries to avoid these Tariffs. Some people also think the war with Ukraine might be a reason the US is trading more with Mexico. The decrease in trade with China has made the US and South Korean relationship stronger than ever. This is because major companies in South Korea are now having facilities in the US. The export numbers to the United States from South Korea, has surpassed exports to China

Link

https://www.nytimes.com/2024/02/07/business/economy/united-states-china-mexico-trade.html

A Decline in Consumer Debt Growth in December (2023) Signals a Shift in Consumer Behavior

    The article highlights a significant decline in consumer debt growth in December 2023, following a year of substantial credit expansion. Although the total increase in credit throughout 2023 was 8.4%, the credit growth slowed down to 0.4% in that month. In the fourth quarter of 2023, credit card debt increased by $212 billion to $1.13 trillion, contributing to a total household debt of $17.5 trillion in the same quarter. Delinquency rates for credit card and auto loans also grew, especially among younger and lower-income households.

    The decline in consumer debt growth at the end of 2023 may indicate cautious consumer spending that would potentially affect overall economic activity and GDP. Furthermore, debt-to-ratio falls under the general criteria for most borrowers; that is, household income growth equates and/or outpaces household debt growth, maintaining relatively healthy borrowers' ability to pay. Ultimately, the reverse in consumer spending habits would potentially provoke the Federal Reserve to cut interest rates promptly.

Link to article:

https://www.usnews.com/news/economy/articles/2024-02-08/consumers-hit-the-brakes-on-debt-just-as-it-reaches-record-levels

Limiting pollution in developed nations without curtailing their economies

After learning about Kuznets curves in class, I have spent a lot of time thinking about how we can help poorer nations develop like we did without creating mass pollution. It is a difficult problem because such nations deserve to industrialize just as much as we did, yet now that we know more about the environment, we can’t just sit back and allow carbon dioxide to be pumped into the atmosphere. Writers on Camfil, an air filtration company which also runs a blog, suggest that the most sensible option is to financially support these nations in making long-term sustainable energy investment. Despite the additional expenses associated with green energy, they argue that it will produce positive externalities such as decreases in preventable illness (which costs to treat), and subsequently, higher worker productivity because they are in the hospital less. Their points made a lot of sense to me, but I still wondered: if this were true, why wouldn’t we be seeing environmentally friendly investments everywhere? My guess is that the reason companies within these nations do not make such investments is because from their perspective, it is not worthwhile to do so; they would be footing the bill for general welfare while only receiving a fraction of the benefit. This is a problem of game-theory. One of the key lessons I took away from the sliver of game-theory I have learned is that if you want someone to do something against their best interest, you have to twist the game so that their only rational choice is to acquiesce. In subsidizing or in some way incentivizing the purchase of renewable energy, developed nations can set up the game so that everyone wins: we help the economies of developed nations to grow, and we protect the climate which we all live in.

https://cleanair.camfil.us/2017/10/30/air-pollution-in-developing-countries/#:~:text=Developed%20countries%20are%20more%20likely,economic%20resources%20to%20do%20so.&text=Energy%20production%20is%20one%20of,developed%20countries%20comes%20from%20coal.