Steady inflation
Inflation was steady in November, rising in line with economists’ expectations, but signaling mixed progress on disinflation. The consumer price index (CPI) rose 0.3% from October, bringing the annual increase to 2.7%(1). Core inflation, which strips out the volatility of food and energy prices, continued its steady climb, rising 0.3% for the fourth consecutive month(1). Over the past year, core CPI has increased 3.3%, signaling that underlying inflationary pressures remain persistent(1). Although shelter costs showed signs of cooling, they still accounted for nearly 40% of the overall rise in prices(1). Grocery prices continue to be a pain point for consumers, with prices rising 0.5%, the largest increase since early 2023(1). While inflation has eased from its pandemic-era peak, progress has slowed, driving recent discussions about a more gradual approach to future Federal Reserve rate cuts.
November job growth
On a more optimistic note, November brought robust job growth with 227,000 new jobs(2). All sectors showed gains except retail, an unusual trend since retail hiring typically increases ahead of the holiday season(2). Despite strong November job growth, the broader trend shows signs that the labor market is continuing to slowly weaken. Over the past three months, job growth has averaged 173,000, slower than earlier in the year(2). The unemployment rate edged up to 4.2%, marking the highest long-term joblessness level in nearly three years(2). Together, these signs provide more evidence that the labor
Outlook for 2025
As 2024 comes to a close, the outlook for 2025 is positive, with strong momentum heading into the new year. One measure of this is the Atlanta Fed’s GDPNow forecast which, for the fourth quarter, accelerated to 3.3%(3) in the first half of December, well above the consensus estimate of 2.1% as of December 13(4). This boost was largely driven by a stronger-than-expected reading in November’s ISM Manufacturing Purchasing Managers’ Index (PMI)(5). The PMI’s new orders component moved into expansion territory for the first time in eight months, signaling rising business confidence(5), despite the overall PMI remaining in contractionary territory. This could bolster optimism for the manufacturing sector’s stabilization after a prolonged downturn.
Bottom line
As we head into 2025, the economy appears to be likely to have a solid start, though macroeconomic and political risks remain. Ongoing progress on disinflation, along with a labor market that doesn’t rapidly soften, is essential. The Federal Reserve will closely monitor these data to guide its policy, with interest rate cuts expected to slow next year if inflation progress stalls. In addition, uncertainty remains around the potential changes to tax and trade policy. Despite these risks, the tailwinds behind the US’ current economic trends may mean it is well-positioned to continue leading the global economy into 2025.
(1) Source: Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
(2) Source: Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
(3) Source: Federal Reserve Bank of Atlanta, https://www.atlantafed.org/cqer/research/gdpnow
(4) Source: Survey of Economists conducted by Bloomberg
(5) Source: Institute for Supply Management, https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/november/
