Upcoming Events
Monday, January 13
Survey of Consumer Expectations Release
Tuesday, January 14
Producer Price Index Release
Williams Speaks at New York Fed Event
Wednesday, January 15
Consumer Price Index Release
Williams Speaks at Connecticut Business and Industry Association Event
Goolsbee Speaks at Wisconsin Bankers Association Event
Thursday, January 16
GDPNow Update
Friday, January 17
Industrial Production and Capacity Utilization Release
GDPNow Update
Saturday, January 18
Blackout Period Begins
Recent News
Stepping down (but not out)… In a letter to President Biden, Federal Reserve Board Governor and Vice Chair for Supervision Michael Barr said he would resign from the vice chair position on February 28, 2025—or, sooner if a successor is confirmed. He will remain on the Board as a governor.
Barr’s resignation has revived questions about central bank independence.
In November, Fed Chair Jerome Powell said he would not leave the Fed if President-elect Donald Trump requested he do so. When asked whether the president had the authority to fire Fed governors or demote Fed governors with leadership positions at will, Powell said (and then emphasized) that it was “not permitted under the law.”
In statements last week, Barr said he and his lawyers believe the incoming president cannot demote or fire him at will—but that taking the matter to court would do more harm than good:
Do I want to spend the next couple of years fighting about that and is that good for the Fed? And what I decided was that no, it’s not good for the Fed, it would be a serious distraction from our ability to serve our mission.
Barr’s resignation will probably leave the legal question untested, though the once-and-future president might still attempt to fire him from the governor position—or, fire or demote Chair Powell before his term ends.
Waller on inflation… In a talk at an Organization for Economic Cooperation and Development (OECD) event last week, Fed Governor Christopher Waller said he believes “inflation will continue to make progress toward our 2 percent goal over the medium term and that further reductions” in the policy rate “will be appropriate.”
Waller offered four reasons why he expects disinflation to continue:
Trend inflation appears to be falling.
To tease out the underlying trend in inflation, I often look at the six-month percent change in core PCE prices, which is 2.4 percent at an annual rate for November and has mostly been moving down toward 2 percent over the course of the year.
The most recent inflation reading was notably lower.
[…] the monthly reading for November came in much lower than expected at 0.11 percent after rising 0.26 percent in October.
Observed prices have actually grown less than 2 percent over the last year.
[…] inflation in 2024 has largely been driven by increases in imputed prices, such as housing services and nonmarket services, which are estimated rather than directly observed and I consider a less reliable guide to the balance of supply and demand across all goods and services in the economy. These two categories represent about one-third of the core PCE basket. If you look at the prices associated with the other two-thirds of core PCE, they on average increased less than 2 percent over the past 12 months through November. I don't support ignoring our best measures of prices for housing and non-market services, but I find it notable that imputed prices, rather than observed prices, were driving inflation in 2024 and thus expectations of the policy rate path.
Outsized price increases from early 2024 will soon be reflected in the base rather than the change in prices.
[…] the higher inflation readings from early in 2024 will begin to drop out of inflation numbers in January. This should result in a significant step-down in the 12-month inflation numbers through March.
Employment situation… The economy added 256,000 jobs in December 2024, according to the latest release from the Bureau of Labor Statistics (BLS).
Total nonfarm payroll employment was revised up by 7,000 for October 2024, from +36,000 to +43,000. It was revised down by 15,000 for November 2024, from +227,000 to +212,000.
The labor force increased from 168.3 million in November to 168.5 million in December, while the total number of employed persons increased from 161.2 million to 161.7 million. The total number of unemployed persons decreased from 7.1 million to 6.9 million, and the unemployment rate was decreased from 4.2 percent to 4.1 percent.
The prime-age employment to population ratio ticked up to 80.5 percent in December, compared with 80.4 percent in the prior month. For comparison, around 80.6 percent of those between the ages of 25 and 54 were employed in January 2020, just prior to the pandemic.
JOLTS… The number of job openings increased slightly in November 2024, the BLS reported last week. There were 8.1 million openings on the last business day of the month, compared with 7.8 million in the prior month. Job openings have generally declined over the last year. There were 8.9 million job openings on the last business day of November 2023.
According to the BLS, there were 5.3 million hires in November 2024, down from 5.4 million in October. There were 5.1 million separations, down from 5.3 million in the prior month.
Within separations, there were 3.1 million quits in November (down from 3.3 million in October) and 1.8 million layoffs and discharges (up from 1.7 million in the prior month).