Inflation (CPI - All Items, red columns) ticked up again in January to its highest reading since June, no doubt confirming in Jerome Powell's mind that, per his comments 2 days ago, with inflation still elevated and the jobs market strong, there is no hurry to cut the Fed's benchmark rate. Many believe the beginning of threatened tariff wars will only make inflation rise, though the president disagrees and has called for the Fed to cut interest rates. (Powell's tenure runs through May 2026.)
This analysis and data were compiled by our friend Patrick Carlisle at Compass.
Interest rates have so far responded to the latest inflation report by rising as shown in this daily average chart updated yesterday, the day of the inflation report release.
The weekly average interest rate reading will come out later today from Freddie Mac, and will be posted on their website here.
Consumer Confidence declined again, according to the University of Michigan Surveys of Consumers, "among Republicans, Independents, and Democrats...along with consumers across age and wealth groups. Furthermore, all five index components deteriorated this month...Expectations for personal finances sank about 6% from last month, again seen across all political affiliations, reaching its lowest value since October 2023...Year-ahead inflation expectations jumped up from 3.3% last month to 4.3% this month, the highest reading since November 2023 and...only the fifth time in 14 years we have seen such a large one-month rise in year-ahead inflation expectations."
The enormous volatility and uncertainty in national and international political developments appears to be making many people increasingly unsure about the future.
The jobs market saw an increase in January that was somewhat below general expectations - though these numbers are often subsequently revised - while the unemployment rate ticked down to 4%. In recent years, investors and economists can't seem to decide whether a strong jobs market is good or bad news as they attempt to assess its influence either on the economy or on the Fed. It's hard to make concrete predictions regarding the effects of the current administration's recent attempts to massively downsize the federal workforce and reduce federal funding across a broad spectrum of endeavors (which impacts hundreds of thousands of other jobs). Difficult to see these actions helping employment or consumer confidence, at least in the short term, but clearly the administration believes the economic and political benefits outweigh the negatives. And, of course, lawsuits are being filed in their dozens.
(After the Deepseek-triggered plunge) stock markets have rebounded and remain largely unfazed by recent developments, maintaining their enormous increases since the beginning of 2024 - a huge positive for household wealth, especially more affluent households.
The jobs market saw an increase in January that was somewhat below general expectations - though these numbers are often subsequently revised - while the unemployment rate ticked down to 4%. In recent years, investors and economists can't seem to decide whether a strong jobs market is good or bad news as they attempt to assess its influence either on the economy or on the Fed. It's hard to make concrete predictions regarding the effects of the current administration's recent attempts to massively downsize the federal workforce and reduce federal funding across a broad spectrum of endeavors (which impacts hundreds of thousands of other jobs). Difficult to see these actions helping employment or consumer confidence, at least in the short term, but clearly the administration believes the economic and political benefits outweigh the negatives. And, of course, lawsuits are being filed in their dozens.
(After the Deepseek-triggered plunge) stock markets have rebounded and remain largely unfazed by recent developments, maintaining their enormous increases since the beginning of 2024 - a huge positive for household wealth, especially more affluent households.
According to NAR's latest data release, "Almost 90% of metro markets experienced [year-over-year] home price increases in the fourth quarter of 2024." I updated annual home price charts for 75 metro-area markets through 2024, and those charts can be found here. Note that "metro areas" are government designated regions that typically cover multiple counties and sometimes parts of multiple states. Bay Area County annual charts were created for the January newsletters last month.
NAR's National Housing Affordability Index, (Principal & Interest Payment as % of Median Family Income): Generally speaking, housing has been more unaffordable during the last 3 years than at any time going back to 1989 (and undoubtedly much earlier). Though not much worse in Q4 2024 than at the peaks of the late 1980's and subprime booms. Both those previous peaks were followed by significant recessions, however that is not typically being predicted by economists now.
And now for something completely different (as Monty Python used to say), the price of gas, unadjusted for inflation, since 2000:
And now for something completely different (as Monty Python used to say), the price of gas, unadjusted for inflation, since 2000:
Just to be clear: No political opinions are meant to be expressed in this email.
