Economic Content

The Federal Reserve took another shot at inflation, raising overnight Federal Funds. This continued the trend of raising rates, which occurred at every one of its last nine meetings. 

The hiking cycle may be nearing the end, but the interest rate hikes have taken their toll: most inflation measures have peaked, leading indicators are pointing towards a recession, and economic growth is stalling. 

Inflation is not going anywhere. In fact, it is going back up. Inflation as measured by the Personal Consumption Expenditures (PCE) Price Index rose 0.6% m/m in January, driven by a large 2% m/m increase in energy prices. 

More importantly, the core PCE rate rose 0.6% m/m, the highest reading in seven months. There is more to the story when it comes to Personal Income and Real Disposable Personal Income rates. Read about it in our Chief Economist's latest North Report. 

Retail sales rose at a huge 3% m/m rate with sales in almost every major category rising. But this headline may be too good to be true. 

This major gain was driven by a 7.2% leap in restaurant and bar sales, which was far above the pre-pandemic record and average. What other factors are driving this suspiciously optimistic retail report?

The employment report came out stronger than expected, showing the economy created 223k jobs in December, higher than expectations of 200k. Job gains were widespread across industries, with notable gains in Education and Health Services and Leisure and Hospitality.

While these headline numbers grab all the attention, the most important part of the report is the trend in job creation, which is distinctly down. What other cooling trends do we need to look at?