Inflation (Economics)

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    Will America’s Good News on Inflation Last?

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    One of the biggest economic surprises of 2023 was how quickly inflation faded. A dig into the details offers hints at whether it will last into 2024.Prices climbed rapidly in 2021 and 2022, straining American household budgets and chipping away at President Biden’s approval rating. But inflation cooled in late 2023, a spurt of progress that happened more quickly than economists had expected and that stoked hopes of a gentle economic landing.Now, the question is whether the good news can persist into 2024.As forecasters try to guess what will happen next, many are looking closely at where the recent slowdown has come from. The details suggest that a combination of weaker goods prices — things like apparel and used cars — and moderating costs for services including travel has helped to drive the cooldown, even as rent increases take time to fade.Taken together, the trends suggest that more disinflation could be in store, but they also hint that a few lingering risks loom. Below is a rundown of the big changes to watch.What we’re talking about when we talk about disinflation.What’s happening in America right now is what economists call “disinflation”: When you compare prices today with prices a year ago, the pace of increase has slowed notably. At their peak in the summer of 2022, consumer prices were increasing at a 9.1 percent yearly pace. As of November, it was just 3.1 percent.Still, disinflation does not mean that prices are falling outright. Price levels have generally not reversed the big run-up that happened just after the pandemic. That means things like rent, car repairs and groceries remain more expensive on paper than they were in 2019. (Wages have also been climbing, and have picked up more quickly than prices in recent months.) In short, prices are still climbing, just not as quickly.What inflation rate are officials aiming for?The Federal Reserve, which is responsible for trying to restore price stability, wants to return price increases to a slow and steady pace that is consistent with a sustainable economy over time. Like other central banks around the world, the Fed defines that as a 2 percent annual inflation rate. What caused the 2023 disinflation surprise?Inflation shocked economists in 2021 and 2022 by first shooting up sharply and then remaining elevated. But starting in mid-2023, it began to swing in the opposite direction, falling faster than widely predicted.As of the middle of last year, Fed officials expected a key measure of inflation — the Personal Consumption Expenditures measure — to end the year at 3.2 percent. As of the latest data released in November, it had instead faded to a more modest 2.6 percent. The more timely Consumer Price Index measure has also been coming down swiftly.The surprisingly quick cooldown started as travel prices began to decelerate, said Omair Sharif, founder of Inflation Insights. When it came to airfares in particular, the story was supply.Demand was still strong, but after years of limited capacity, available flights and seats had finally caught up. That combined with cheaper jet fuel to send fares lower. And while other travel-related service prices like hotel room rates jumped rapidly in 2022, they were increasing much more slowly by mid-2023.Travel inflation is returning to normalHotel price increases look much as they did before the pandemic, while airfares have recently fallen.

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    Year-over-year percentage change in Consumer Price Index categories
    Source: Bureau of Labor StatisticsBy The New York TimesThe next change that lowered inflation came from goods prices. After jumping for two years, prices for products like furniture, apparel and used cars began to climb much more slowly — or even to fall.The amount of disinflation coming from goods was surprising, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. And, encouragingly, “it was reasonably broad-based.”Used car deflation is backUsed vehicle prices fell in 2023. New car prices have been climbing, but more slowly than in 2022.

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    Year-over-year percentage change in Consumer Price Index categories
    Source: Bureau of Labor StatisticsBy The New York TimesThe inflation relief came partly from supply improvements. For years, snarled transit routes, expensive shipping fares and a limited supply of workers had limited how many products and services companies could offer. But by late last year, shipping routes were operating normally, pilots and flight crews were in the skies, and car companies were churning out new vehicles.“The supply side is at work,” said Skanda Amarnath, executive director at the worker-focused research group Employ America.What could be the next shoe to drop?In fact, one source of long-awaited disinflation has yet to show up fully: a slowdown in rental inflation.Private-sector data tracking new rents soared early in the pandemic but then slowed sharply. Many economists think that pullback will eventually feed into official inflation data as renters renew their leases or start new ones — but the process is taking time.Housing inflation remains faster than normalRent increases and a measure that approximates the cost of owned housing are both slowing only gradually.

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    Year-over-year percentage change in Consumer Price Index categories
    Source: Bureau of Labor StatisticsBy The New York Times“We’re likely to see more moderation in rent,” said Laura Rosner-Warburton, senior economist and founding partner at MacroPolicy Perspectives. Because a bigger rent cooldown remains possible and goods price increases could keep slowing, many economists expect overall consumer price inflation to fall closer to the Fed’s goal by the end of 2024. There is even a risk that it could slip below 2 percent, some think.“It’s a scenario that deserves some discussion,” Ms. Rosner-Warburton said. “I don’t think it’s the most likely scenario, but the risks are more balanced.”What could go wrong?Of course, that does not mean Fed officials and the American economy are entirely out of the woods. Falling gas prices have been helping to pull inflation lower both overall and by feeding into other prices, like airfares. But fuel prices are notoriously fickle. If unrest in gas-producing regions causes energy costs to jump unexpectedly, stamping inflation out will become more difficult.Geopolitics also carry another inflation risk: Attacks against merchant ships in the Red Sea are messing with a key transit route for global commerce, for instance. If such problems last and worsen, they could eventually feed into higher prices for goods.And perhaps the most immediate risk is that the big inflation slowdown toward the end of 2023 could have been overstated. In recent years, end-of-year price figures have been revised up and January inflation data have come in on the warm side, partly because some companies raise prices at the beginning of the new year.“There is a bunch of choppiness coming,” Mr. Sharif said. He said he’ll closely watch a set of inflation recalculations slated for release on Feb. 9, which should give policymakers a clearer view of whether the recent slowdown has been as notable as it looks.But Mr. Sharif said the overall takeaway was that inflation looked poised to continue its moderation.That could help to pave the path for lower interest rates from the Fed, which has projected that it could lower borrowing costs several times in 2024 after raising them to the highest level in more than 22 years in a bid to cool the economy and wrestle inflation under control.“There’s not a lot of upside risk left, in my mind,” Mr. Sharif said. More

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    Holiday Spending Increased, Defying Fears of a Decline

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    While the pace of growth slowed, spending stayed strong because of robust job growth and strong wage gains.Despite lingering inflation, Americans increased their spending this holiday season, early data shows. That comes as a big relief for retailers that had spent much of the year fearing the economy would soon weaken and consumer spending would fall.Retail sales increased 3.1 percent from Nov. 1 to Dec. 24 compared with the same period a year earlier, according to data Mastercard released on Tuesday. The credit card company’s numbers are not adjusted for inflation.Spending increased across many categories, with restaurants experiencing one of the largest jumps, 7.8 percent. Apparel increased 2.4 percent, and groceries also had gains.The holiday sales figures, driven by a healthy labor market and wage gains, suggests that the economy remains strong. The Federal Reserve’s campaign to rein in high inflation by raising interest rates over the last few years has slowed the economy, but many economists believe a so-called soft landing is within reach.“What we’re seeing during this holiday season is very consistent with how we’re thinking about the economy, which is that it’s an economy that is still very much expanding,” said Michelle Meyer, Mastercard’s chief economist.Solid job growth is allowing people to spend more. And even though consumer prices have risen a lot in the last two years, wages have grown faster on the whole.“We’re now entering the period, and we’re seeing it to some extent during the holiday season, where consumers have built up real purchasing power,” Ms. Meyer said.Still spending in categories like electronics and jewelry declined this season. And the rate of growth in spending has moderated from the last couple of years. In 2022, retail sales during the holiday season increased 5.4 percent, according to the National Retail Federation. In 2021, they rose 12.7 percent, the largest percentage increase in at least 20 years. Online sales growth has also slowed in 2023, increasing 6.3 percent compared with 10.6 percent from 2021 to 2022, according to Mastercard.While the economy is strong overall, Americans are being more mindful of how they’re spending, and that discretion shaped the shopping season.Some retailers had expressed concerns in recent months that shoppers appeared glum and fearful about the economy. Walmart and Target noted that shoppers seemed to be waiting for sales before buying, a change from recent years when they spent more freely.“The caution that they’ve taken on their spend and where they’re spending has been really noticeable in the second half of the year, where a lot of customers have been affected, especially lower-income and middle-income” people, said Jessica Ramírez, a retail research analyst at Jane Hali & Associates.In a return to some of the trends that prevailed before the pandemic, many retailers and brands offered promotions. Discounts were in the 30 to 50 percent range, Ms. Ramírez said. But the discounts were more targeted this year than last because fewer companies were saddled with gluts of inventory.Retail sales increased this holiday season compared with the same period a year earlier, though at a slower pace than last year.Maansi Srivastava/The New York TimesThe categories that have faced falling sales this year — like electronics, home furnishings and toys — saw some of the biggest discounts leading up to Christmas. Those goods had enjoyed booming sales during the pandemic.Alexan Weir, a 30-year-old mother in Orlando, Fla., said she was pleased to find deals on toys when she bought Christmas gifts for her daughters this month. Among the items she bought at Target were the Asha doll, based on the main character from the Disney movie “Wish”; an Elsa doll from “Frozen”; and a Minnie Mouse kitchen set. With discounts, the items together cost about half as much as their total list prices of $200.“As a parent you’re just trying to make your kids happy. You’re not trying to break the bank,” Ms. Weir said. “I spent a little bit more this year, but at least with the few sales that I received, I can say I was not heartbroken about how much I was spending.”Barbie — whose banner year was fueled by the blockbuster movie — sold particularly well in a year when there wasn’t a breakout toy. The doll and her many accouterments have been selling well at Mary Arnold Toys, a family-owned store on Manhattan’s Upper East Side. And overall sales at the shop have been steady, said Ezra Ishayik, who has run the store for 40 years.“It looks like it is about even with last year — not better, not worse,” Mr. Ishayik said. “The economy looks good to me. It’s decent, it’s OK, people are buying. We are on the high end of the industry so we don’t see any downtrend at all.”But the past few months have been more challenging for Modi Toys.Modi, an online retailer, sells plush toys and books based on Hindu culture and usually sees two sales bumps in the fourth quarter — one in the lead up to Diwali and another around Christmas.Normally the company brings in more than $100,000 in sales in the month before Diwali, which fell on Nov. 12, but this year sales dropped into the five-figure range. That was partly because the retailer launched a product too early and then had to offer hefty discounts to spur sales — something retailers try to avoid with new merchandise.“That’s when we knew that we really were going to have a challenging holiday season,” said Avani Modi Sarkar, a founder of the company.As she wraps up the year and looks toward 2024, Ms. Sarkar is testing new digital marketing strategies, including sending personalized email newsletters to customers and closely monitoring discounts.“We’re just trying to close the gap for us and not end the year with as big of a gap as we would have,” she said. “I know what we’re capable of, and I’m trying to not only get to that level again, but surpass it.”One clear sign that shoppers are being more careful about how much they spend comes from discount retailers. In November, Burlington, an off-price retailer, and the parent company of Marshalls and T.J. Maxx said they saw comparable store sales increase 6 percent.The online retailer ThriftBooks said its sales were also up this holiday season, by more than 20 percent in November and more than 24 percent this month compared with a year ago, according to Ken Goldstein, the company’s chief executive.“This was unprecedented,” Mr. Goldstein said. “This is beyond belief in terms of the volume that we’re doing. Because we’re a value product, I think a lot of people are putting their dollars to work.” More

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    Under Argentina’s New President, Fuel Is Up 60%, and Diaper Prices Have Doubled

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    Javier Milei warned that things would get worse before they got better. Now Argentines are living it.Over the past two weeks, the owner of a hip wine bar in Buenos Aires saw the price of beef soar 73 percent, while the zucchini he puts in salads rose 140 percent. An Uber driver paid 60 percent more to fill her tank. And a father said he spent twice as much on diapers for his toddler than he did last month.In Argentina, a country synonymous with galloping inflation, people are used to paying more for just about everything. But under the country’s new president, life is quickly becoming even more painful.When Javier Milei was elected president on Nov. 19, the country was already suffering under the world’s third-highest rate of inflation, with prices up 160 percent from a year before.But since Mr. Milei took office on Dec. 10 and quickly devalued the Argentine currency, prices have soared at such a dizzying pace that many in this South American country of 46 million are running new calculations on how their businesses or households can survive the far deeper economic crunch the country is already enduring.“Since Milei won, we’ve been worried all the time,” said Fernando González Galli, 36, a high school philosophy teacher in Buenos Aires.Mr. Galli has been trying to cut back without making life worse for his two daughters, who are 6 years and 18 months old, including switching to a cheaper brand of diapers and racing to spend his Argentine pesos before their value disintegrates even further. “As soon as I get my paycheck, I go buy everything I can,” he said.Since Javier Milei took office on Dec. 10 and quickly devalued the Argentine currency, prices have risen at a dizzying pace.Emiliano Lasalvia/Agence France-Presse — Getty ImagesNahuel Carbajo, 37, an owner of Naranjo Bar, a trendy Buenos Aires wine bar, said that like most Argentines, he had become accustomed to regular price increases, but this past week went far beyond what even he was used to.Since Mr. Milei won, the price for the premium steak that Mr. Carbajo serves soared 73 percent, to 14,580 pesos, or roughly $18, per kilogram, about 2.2 pounds; a five-kilogram box of zucchinis rose to 15,600 pesos from 6,500; and avocados cost 51 percent more than the beginning of this month.“There’s no way for salaries or people’s incomes to adapt at that speed,” Mr. Carbajo said.Mr. Milei’s spokesman, Manuel Adorni, said accelerating inflation was the inevitable consequence of finally fixing Argentina’s distorted economy.“We’ve been left with a multitude of problems and unresolved issues that we have to start addressing,” he said. “Inevitably, we will go through months of high inflation.”Mr. Milei has warned Argentines that his plans to shrink the government and remake the economy would hurt at first. “I prefer to tell you the uncomfortable truth rather than a comfortable lie,” he said in his inaugural address, adding this past week that he wanted to end the country’s “model of decline.”Argentina’s economy has been mired in crisis for years, with chronic inflation, rising poverty and a currency that has plunged in value. The economic turmoil paved the way to the presidency for Mr. Milei, a political outsider who had spent years as an economist and television pundit railing against what he called corrupt politicians who had destroyed the economy, often for personal gain.During the campaign, he vowed to take a chain saw to public spending and regulations, even wielding an actual chain saw at rallies.After Mr. Milei’s victory, price increases began accelerating in expectation of his new policies.Buying fruit and vegetables in Buenos Aires. Argentines suffer under the world’s third highest rate of inflation.Tomas Cuesta/ReutersThe previous leftist government had used complicated currency controls, consumer subsidies and other measures to inflate the peso’s official value and keep several key prices artificially low, including gas, transportation and electricity.Mr. Milei vowed to undo all that, and he has wasted little time.Two days after taking office, Mr. Milei began cutting government spending, including consumer subsidies. He also devalued the peso by 54 percent, putting the government’s exchange rate much closer to the market’s valuation of the peso.Economists said such measures were necessary to fix Argentina’s long-term financial problems. But they also brought short-term pain in the form of even faster inflation. Some analysts questioned the lack of adequate safety nets for the poorest Argentines.In November, prices rose 13 percent from October, according to government data. Analysts predict prices will increase another 25 percent to 30 percent this month. And from now until February, some economists are forecasting an 80 percent jump, according to Santiago Manoukian, the chief economist at Ecolatina, an economics consulting firm.The forecasts are partly caused by soaring gas prices, which increased 60 percent from Dec. 7 to Dec. 13, and have a trickle-down effect on the economy.The currency devaluation made imported products like coffee, electronic devices and gas immediately more expensive because they are priced in U.S. dollars. A monthly Netflix subscription in Argentina jumped 60 percent to 6,676 pesos, or $8.30, the day after the devaluation, for example. It also prompted some domestic producers, including farmers and cattle ranchers, to increase prices to align them with their own rising costs.With the chronic high inflation, labor unions often negotiate large raises to try to keep up, yet those wage increases are quickly eaten up by sharp price hikes. Informal workers, a list that includes nannies and street vendors, and who make up nearly half of the economy, also do not get such raises.Outside a clothing store this month in Buenos Aires. In November, prices rose 13 percent from October, and analysts predict that prices will increase another 25 percent to 30 percent this month.Luis Robayo/Agence France-Presse — Getty ImagesOn Wednesday, Mr. Milei launched his next big steps to remake the government and economy with an emergency decree that significantly reduces the state’s role in the economy and eliminates a raft of regulations.The measure prohibits the state from regulating the rental real estate market and setting limits on fees that banks and health insurers can charge customers; changes labor laws to make it easier to fire workers while also placing limits on strikes; and turns state companies into corporations so they can be privatized.Many legal analysts immediately questioned the decree’s constitutionality, saying that Mr. Milei was trying to subvert Congress.After the speech, people across Buenos Aires, like Jesusa Orfelia Peralta, 73, a retiree, took to the streets banging on pots to show their displeasure.She worried that price increases would make proper health care too expensive for her and her husband. Despite severe spinal problems, she said she did not hesitate to head out, using a walker, and vent her anger in public. “Where else would I be?” she said.A protest on Wednesday in Buenos Aires against Mr. Milei’s austerity measures.Luis Robayo/Agence France-Presse — Getty ImagesMr. Milei has sought to discourage protests by threatening to cancel welfare plans and fine anyone involved in demonstrations that block roads. Human rights groups have widely criticized such policies as restricting the right to peacefully protest.For now, most Argentines are trying to figure out how to make ends meet in what often feels like both a complicated course in economics and a frenzied sprint to buy before prices rise again.“I always say that we are at university, and every day we sit for a difficult exam, every five minutes,” Roberto Nicolás Ormeño, an owner of El Gauchito, a small empanada shop in downtown Buenos Aires.Mr. Ormeño said he had been scouring the market for his ingredients and changing suppliers almost every week, either because they increase prices too much or provide poorer quality products.He is trying to avoid passing along too much of his price increases to customers, though he is unsure how long he can sustain that. “I see my frequent customers buying one dozen instead of two” dozen empanadas, he said.Marisol del Valle Cardozo, who has a 3-year-old daughter, has been cutting back in a bid to make ends meet, turning to cheaper brands and going out less. “We don’t turn the air-conditioning on as much,” she said. “We decreased our plans on weekends from four times a month to just once.”Ms. Cardozo, who works for a police department outside Buenos Aires, said that she got a raise this year, but that it is already not enough. She also drives an Uber, but said that fare increases had not kept up with the soaring gas prices.Despite the challenges, Ms. Cardozo said she remained a Milei supporter and was hoping his policies work.“We were living under a fantasy,” she said, referring to gas prices before the recent hike. “If these adjustments are necessary to thrive in the end, they’re worth it.”Protesters in front of the National Congress on Thursday in Buenos Aires.Luis Robayo/Agence France-Presse — Getty ImagesJack Nicas More

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    Price Increases Cooled in November as Inflation Falls Toward Fed Target

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    A key inflation measure has been slowing and overall prices actually declined slightly from October, good news for officials and consumers.A closely watched measure of inflation cooled notably in November, good news for the Federal Reserve as officials move toward the next phase in their fight against rapid price increases and a positive for the White House as voters see relief from rising costs.The Personal Consumption Expenditures inflation measure, which the Fed cites when it says it aims for 2 percent inflation on average over time, climbed 2.6 percent in the year through November. That was down from 2.9 percent the previous month, and was less than what economists had forecast. Compared with the previous month, prices overall even fell slightly for the first time in years.That decline — a 0.1 percent drop, and the first negative reading since April 2020 — came as gas prices dropped. After volatile food and fuel prices were stripped out for a clearer look at underlying price pressures, inflation climbed modestly on a monthly basis and 3.2 percent over the year. That was down from 3.4 percent previously.While that is still faster than the Fed’s goal, the report provided the latest evidence that price increases are swiftly slowing back toward the central bank’s target. After more than two years of rapid inflation that has burdened American shoppers and bedeviled policymakers, several months of solid progress have helped to convince policymakers that they may be turning a corner.Increasingly, officials and economists think that they may be within sight of a soft economic landing — one in which inflation moderates back to normal without a painful recession. Fed policymakers held interest rates steady at their meeting this month, signaled that they might well be done raising interest rates and suggested that they could even cut borrowing costs three times next year.“Inflation is slowing a lot faster than the Fed had anticipated — that could allow them to potentially cut soon, and more aggressively,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. “They’re really trying their best to deliver a soft landing here.”The inflation progress is welcome news for the Biden administration, which has struggled to capitalize on strong economic growth and low unemployment at a time when high prices are eroding household confidence.President Biden released a statement celebrating the report, and Lael Brainard, director of the National Economic Council, called the slowdown in inflation “a significant milestone” in a call with reporters.“Inflation has come down faster than even the more optimistic forecasts,” she said, noting that wage gains are outstripping price increases. While she didn’t comment on monetary policy directly, citing the central bank’s independence from the White House, she did note that households are already facing lower mortgage rates as investors come to expect a more lenient Fed.Based on market pricing, the Fed is expected to begin lowering interest rates as soon as March, though officials have argued that it is too early to talk about when rate cuts will commence.“Inflation has eased from its highs, and this has come without a significant increase in unemployment — that’s very good news,” Jerome H. Powell, the Fed chair, said at that meeting. Still, he emphasized that “the path forward is uncertain.”Central bankers are likely to watch closely for signs that inflation has continued to cool as they contemplate when to start cutting rates. Some officials have suggested that keeping borrowing costs steady when price increases are slowing would effectively squeeze the economy more. (Interest rates are not price-adjusted, so they get higher after stripping inflation out as inflation falls.)Still, Fed officials have been hesitant to declare victory after repeated head fakes in which price increases proved more stubborn than expected, and at a time when geopolitical issues could complicate supply chains or push up gas prices.“The more benign inflation data is certainly something to celebrate, but there is some turbulence ahead,” Omair Sharif, founder of Inflation Insights, wrote in a note reacting to Friday’s data. “Fed officials will want to get through before turning the focus squarely to rate cuts.”Policymakers are also likely to keep a close eye on consumer spending as they try to figure out how much momentum is left in the economy.The report released Friday showed that consumers are still spending at a moderate clip. A measure of personal consumption climbed 0.2 percent from October, and 0.3 percent after adjusting for inflation. Both readings were quicker than the previous month. That suggested that growth is still positive, though is no longer quite as hot as it was earlier this year.Officials still expect the economy to slow more notably in 2024, a demand cool-down that they think would pave the way to sustainably slower price increases.After a year in which inflation cooled rapidly in spite of surprisingly strong growth, economists are expressing humility. But policymakers remain wary of a situation in which growth remains too strong.“If you have growth that’s robust, what that will mean is probably we’ll keep the labor market very strong; it probably will place some upward pressure on inflation,” Mr. Powell said at his news conference. “That could mean that it takes longer to get to 2 percent inflation.”That, he said, “could mean we need to keep rates higher for longer.” More

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    What Social Trends Taught Us About the 2023 Economy

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    From girl dinners to ChatGPT, a look back at the trends that broke the internet and taught us about the American economy this year.This year, the world learned that some men just can’t stop thinking about the Roman Empire. Over here at The New York Times, we can’t stop thinking about what social trends like that one tell us about the American economy.We had no shortage of viral memes and moments to discuss in 2023. Americans flocked to Paris (and overseas in general). Millennial women stocked up on the Stanley thermoses their dads used to use, one of a range of female-powered consumer fads. Thanks partly to Barbie, Birkenstocks also came back harder than a ’90s trend. People spoke in Taylor Swift lyrics.Social developments like those can tell us a lot about the economy we’re living in. To wrap up 2023, we ran through some of the big cultural events and what they taught us about the labor market, economic growth and the outlook for 2024.‘He’s Just Ken’ Had Labor Market Tiebacks“Barbie,” the movie that launched a thousand think pieces, hit theaters this summer with a telling promotional catchphrase: “She’s everything. He’s just Ken.”This, clearly, was a movie about the labor market.The film pictured Barbie trying to grapple with the harshness of a real world that was not dominated by women, and Ken trying to find his footing after realizing that he lacked a clear place in Barbie’s fictional world.That was more than just social commentary. As in Barbieland, America has seen a real divergence in outcomes for young and middle-aged men and women in recent years — specifically in the labor market. Younger women were working at historically high rates before the pandemic, and they bounced right back after the 2020 downturn.Young Women Work at Near Record RatesWhile the employment rate for young women is near its peak, the employment rate for young men is below where it was in the 1990s.

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    Share of people ages 25 to 34 who are employed
    Source: Bureau of Labor StatisticsBy The New York TimesMen were a different story. Younger men’s employment bounced back, but they are still working at much lower rates than a few decades ago. Men in the 35- to 44-year-old group in particular have been working less and less over the years, and have recently failed to recapture their 2019 employment peak.Falling Employment Rates for Middle-Aged MenMiddle-aged women are employed at record levels while men in the same age group have been working less and less.

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    Share of people ages 35 to 44 who are employed
    Source: Bureau of Labor StatisticsBy The New York TimesIn 2023 specifically, women gained 1.4 jobs for every one that men did (through November).What is behind the long-run decline in male work? Economists and sociologists point to a number of causes: A shift away from marriage and the decline in childbearing have eroded one traditional social rationale for work. Men may be having something of an on-the-job identity crisis in a modern economy where many new jobs tilt toward “pink collar” service industries like child care and nursing.“Ken is trying to find his place in the world,” said Betsey Stevenson, an economist at the University of Michigan, explaining that it ties back to a world of different opportunities that have left some men searching for a new footing. “We moved from an economic model where the median job is making stuff to an economy where the median job is taking care of somebody.”Men are also less educated than today’s young women, which may leave some with less marketable résumés. (In the movie, Ken tries to get a job on the shoreline but is told he lacks the skills. He laments: “I can’t even beach here!”)Taylor Swift and Beyoncé Showed America’s Willingness to SpendIt wasn’t just the labor market that women dominated this year: It was a year of female-centric consumerism. Take, for instance, the two musical events of the summer. Both Beyoncé and Taylor Swift had huge concert tours that spurred lots of economic activity. They also released films of their shows, bringing the fun (and the money) to the box office.The concert spree itself was an example of a broader economic trend. Consumers continued to spend strongly in 2023, especially on services like live music and international travel. That was something of a surprise because forecasters had thought that much-higher interest rates from the Federal Reserve were likely to tip the economy into recession this year. ‘Girl Dinners’ Ranked Among Cheapish Food TrendsAnother place where ladies led the way in 2023? Culinary innovation. Young women posted viral TikToks about what might have, depending on one’s demographic patois, been termed a charcuterie board (millennial), a Ploughman’s (Brit) or a lunchable (Oscar Mayer). But to Generation Z, it was Girl Dinner.This, much like the Roman Empire and men meme, was an instance of a gender’s being applied to a pretty broad and basic concept. Girl dinners came in many shapes and sizes, but they were essentially just meals constructed from relatively affordable ingredients: Think leftover cheese chunks, boxed macaroni or chicken nuggets.What they did clearly echo was a broader economywide trend toward greater food thriftiness. Big retailers including Walmart and McDonald’s reported seeing a new group of shoppers as even comfortably middle-class consumers tried to save money on groceries after years of rapid food inflation. Overall price increases slowed markedly in 2023, but several years of rapid inflation have added up, leaving many prices notably higher for many basic necessities.Ozempic Worried Big FoodConsumer grocery trends saw another big and unexpected change this year. Some big food companies are worried that people are on the cusp of buying less food because of products like Ozempic and Wegovy, which rose to prominence this year as part of a new and effective set of weight-loss drugs. While that was a hopeful moment for many who have struggled with obesity and its health effects, it was one that caused consternation and adaptation at some retailers and fast-food chains. Walmart has said it already sees an impact on demand.ChatGPT Raised Eyebrows in EconomicsHealth care wasn’t the only sphere to see a big breakthrough in 2023. OpenAI’s ChatGPT chatbot rocketed to prominence this year for generating humanlike writing, and its competitors put up their own offerings (including one that fell in love with a Times columnist).Such technologies could have major economic implications, reshaping how we work, replacing some jobs and potentially boosting productivity. For now, office workers have used it to write emails. Students have used it to write papers. Your friendly economics correspondent tried to use it to write this story section, but artificial intelligence and Times editors have a different understanding of the term “brief.”The freely available version of ChatGPT is working from 2022 data, so it also declined to comment on another key development from this year.“If ‘rizz’ refers to something specific, please provide more context or clarify,” the chatbot responded when asked if it possessed Oxford’s word of the year, a Gen Z shorthand for “charisma.”With a little more prodding, it admitted, “I don’t have personal qualities.” More

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    Prices for Some Goods Are Actually Falling This Holiday Season

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    As inflation slows, prices for some physical goods are falling outright, which could lift consumers’ spirits.American shoppers, burned by more than two years of rapid inflation, are getting some welcome relief this holiday season: Prices on many products are falling.Toys are almost 3 percent cheaper this Christmas than last, government data shows. Sports equipment is down nearly 2 percent. Bigger-ticket items are also showing price declines: Washing machines cost 12 percent less than a year ago, for example. And eggs, whose meteoric rise in prices last winter became a prime example of the country’s inflation problem, are down 22 percent over the past year.Consumer prices, in the aggregate, are still rising, though not nearly as quickly as a year ago. Most groceries still cost more than they did a year ago. So do most services, such as restaurant meals, haircuts and trips to the dentist. And housing costs, the biggest monthly expense for most Americans, are still rising for both renters and home buyers. Overall, the price of physical goods is flat over the past year, while the price of services is up a bit more than 5 percent.Still, economists view the moderation in goods prices as an important step toward putting the high inflation of the past two and a half years more firmly in the rearview mirror. They expect it to continue: Most forecasters say prices for physical products will keep falling next year, especially prices for longer-lasting manufactured goods, where the recent declines have been largest. That should help price increases overall to ease.“We’re just kind of in the beginning of that phase, and we should continue to see downward pressure on prices in this category,” said Michelle Meyer, chief economist for Mastercard.For consumers, who have been dour about the economy despite low unemployment, falling prices on many goods could provide a psychological lift. After the rapid inflation of the past few years, a mere slowdown in price increases might not feel like much to celebrate. But seeing prices fall could be a different story — especially because some of the biggest recent declines have been in categories that consumers tend to pay the most attention to, such as gasoline. (The price of regular gas, which topped $5 a gallon nationally in June 2022, has fallen to just over $3 on average, according to AAA.)Most groceries still cost more than they did a year ago. Maansi Srivastava/The New York Times“People will key in on certain prices,” said Neale Mahoney, a Stanford University economist who recently left a role in the Biden administration. “We know that people will overweight certain things.”The price of many goods soared in 2021, fed by a surge in demand from consumers flush with pandemic relief checks and by supply chain disruptions that limited supplies of many products, especially those from overseas.Many economists initially expected a quick reversal, but instead prices kept rising. Supply chains took longer to return to normal than expected, and Russia’s invasion of Ukraine led to a spike in energy prices in 2022. At the same time, consumer demand for goods remained high, and many companies took advantage of the opportunity to push through price increases and pad their profit margins.Now, however, many of those forces are beginning to fade. Supply chains have largely returned to normal. Oil prices have fallen. Economic weakness in China and other countries has held down demand for many raw materials, which feeds through to consumer prices.Softer demand from American consumers could also be playing a role. The Federal Reserve has raised interest rates repeatedly since early last year in an effort to curb spending and control inflation. Consumers have so far proved remarkably resilient, but retailers in recent months have reported that shoppers have increasingly traded down to cheaper items or waited for sales before buying — trends that could accelerate if the economy cools further next year.“We think that the consumer is going to be looking for value, and that’s because they are very sensitive to price,” Carlos E. Alberini, chief executive of Guess, the fashion retailer, told investors last month. The company has “revisited some of the pricing structure we have in all brands,” he added.The price of services is up a bit more than 5 percent for such things as restaurant meals, haircuts and trips to the dentist.Hiroko Masuike/The New York TimesSome toy manufacturers and retailers that sell toys have also said they expect sales this season to be less robust than in years past and have leaned into advertising their products’ affordability.At many companies, price cuts have taken the form of Black Friday sales and holiday promotions that are larger for some categories of items than in past years. At Signet Jewelers, the big diamond retailer, sales fell in the third quarter, and the company recently said that it expected sales to be lower this holiday season than last year in part because of “elevated promotional activity.”“It’s been a different holiday season,” Virginia C. Drosos, Signet’s chief executive, told investors on a conference call this month. Instead of shopping early, customers are waiting to make their purchases and are looking for deals, she said.Matt Pavich, senior director of innovation and strategy for Revionics, a company that uses artificial intelligence to help retailers set prices, said companies were trying to cut prices before their competitors do.“As prices come down, there’s going to be the race to bring prices down more, get the credit for that,” he said. “We’re going to see retailers really trying to win back consumers’ trust.”Still, prices for most products remain well above where they were before the pandemic. A dozen eggs cost about 50 cents more than in February 2020. Used car prices, another prominent example of pandemic sticker shock, have fallen more than 10 percent from their peak early last year but are 37 percent above where they were in February 2020.Services prices are still climbing more quickly than before the pandemic. Some economists say that goods prices will need to fall further for overall inflation to return to the Federal Reserve’s target of 2 percent a year.“We need pretty substantial deflation, and I wouldn’t call what we’re seeing ‘substantial,’” said Wendy Edelberg, director of the Hamilton Project, an economic policy division of the Brookings Institution. “It’s not even substantial in a historical context.”Indeed, prices of durable goods fell much of the two decades that preceded the pandemic. Long-term trends such as globalization and automation have tended to push down manufacturing costs. Intense competition among retailers, especially with the rise of online shopping, meant those savings were mostly passed on to consumers.Services prices, on the other hand, rarely fall, in part because wages account for a much larger share of the cost of most services. During the decade before the pandemic, services prices gradually rose while goods prices were flat or fell, resulting in an extended period of stable, moderate inflation.Economists don’t expect to see outright deflation, in which prices fall for both goods and services. That’s a good thing: Overall price declines are generally viewed as economically dangerous, if they last.“When demand in the economy is weak, the last thing you want is someone to say, ‘I’m not going to buy that car today because it’s going to be $600 less expensive in six months,’” said Karen Dynan, an economist at Harvard.Brittany Greeson for The New York TimesThere are a few reasons. For starters, in theory, deflation could prompt consumers to hold off on spending, touching off a downward spiral. People may be unlikely to buy today what they expect to be cheaper tomorrow. Once deflation takes hold, it can be difficult to escape: Japan has been stuck in a deflationary pattern since the late 1990s.“When demand in the economy is weak, the last thing you want is someone to say, ‘I’m not going to buy that car today because it’s going to be $600 less expensive in six months,’” said Karen Dynan, an economist at Harvard.For another, companies are unlikely to raise wages in a world where they cannot charge more. And if wages are not going up — or are even going down — it will be harder for households to keep up with fixed bills, like mortgage interest payments.But while broad-based price declines are a problem, most economists view the more limited declines happening now as a sign that the economy is gradually moving past the disruptions of the pandemic.“Supply chains have basically normalized,” said Neil Dutta, head of economic research at Renaissance Macro. “Household demand behavior has basically normalized, the dollar is still pretty strong. I wouldn’t see a reason why goods prices would go higher.” More

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    Is Jerome Powell’s Fed Pulling Off a Soft Landing?

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    It’s too soon to declare victory, but the economic outlook seems sunnier than it did a year ago, and many economists are predicting a surprising win.The Federal Reserve appears to be creeping closer to an outcome that its own staff economists viewed as unlikely just six months ago: lowering inflation back to a normal range without plunging the economy into a recession.Plenty could still go wrong. But inflation has come down notably in recent months — it is running at 3.1 percent on a yearly basis, down from a 9.1 percent peak in 2022. At the same time, growth is solid, consumers are spending, and employers continue to hire.That combination has come as a surprise to economists. Many had predicted that cooling a red-hot job market with far more job openings than available workers would be a painful process. Instead, workers returned from the labor market sidelines to fill open spots, helping along a relatively painless rebalancing. At the same time, healing supply chains have helped to boost inventories and ease shortages. Goods prices have stopped pushing inflation higher, and have even begun to pull it down.The Fed is hoping for “a continuation of what we have seen, which is the labor market coming into better balance without a significant increase in unemployment, inflation coming down without a significant increase in unemployment, and growth moderating without a significant increase in unemployment,” Jerome H. Powell, the Fed chair, said Wednesday.As Fed policymakers look ahead to 2024, they are aiming squarely for a soft landing: Officials are trying to assess how long they need to keep interest rates high to ensure that inflation is fully under control without grinding economic growth to an unnecessarily painful halt. That maneuver is likely to be a delicate one, which is why Mr. Powell has been careful to avoid declaring victory prematurely.But policymakers clearly see it coming into view, based on their economic projections. The Fed chair signaled on Wednesday that rates were unlikely to rise from their 5.25 to 5.5 percent setting unless inflation stages a surprising resurgence, and central bankers predicted three rate cuts by the end of 2024 as inflation continues to cool and joblessness rises only slightly.Consumers continue to spend, and growth in the third quarter was unexpectedly hot.Tony Cenicola/The New York TimesIf they can nail that landing, Mr. Powell and his colleagues will have accomplished an enormous feat in American central banking. Fed officials have historically tipped the economy into a recession when trying to cool inflation from heights like those it reached in 2022. And after several years during which Mr. Powell has faced criticism for failing to anticipate how lasting and serious inflation would become, such a success would be likely to shape his legacy.“The Fed right now looks pretty dang good, in terms of how things are turning out,” said Michael Gapen, head of U.S. Economics at Bank of America.Respondents in a survey of market participants carried out regularly by the research firm MacroPolicy Perspectives are more optimistic about the odds of a soft landing than ever before: 74 percent said that no recession was needed to lower inflation back to the Fed’s target in a Dec. 1-7 survey, up from a low of 41 percent in September 2022.Fed staff members began to anticipate a recession after several banks blew up early this year, but stopped forecasting one in July.People were glum about the prospects for a gentle landing partly because they thought the Fed had been late to react to rapid inflation. Mr. Powell and his colleagues argued throughout 2021 that higher prices were likely to be “transitory,” even as some prominent macroeconomists warned that it might last.The Fed was forced to change course drastically as those warnings proved prescient: Inflation has now been above 2 percent for 33 straight months.Once central bankers started raising interest rates in response, they did so rapidly, pushing them from near-zero at the start of 2022 to their current range of 5.25 to 5.5 percent by July of this year. Many economists worried that slamming the brakes on the economy so abruptly would cause whiplash in the form of a recession.But the transitory call is looking somewhat better now — “transitory” just took a long time to play out.Much of the reason inflation has moderated comes down to the healing of supply chains, easing of shortages in key goods like cars, and a return to something that looks more like prepandemic spending trends in which households are buying a range of goods and services instead of just stay-at-home splurges like couches and exercise equipment.In short, the pandemic problems that the Fed had expected to prove temporary did fade. It just took years rather than months.“As a charter member of team transitory, it took a lot longer than many of us thought,” said Richard Clarida, the former Fed vice chair who served until early 2022. But, he noted, things have adjusted.Fed policies have played a role in cooling demand and keeping consumers from adjusting their expectations for future inflation, so “the Fed does deserves some credit” for that slowdown.While higher interest rates didn’t heal supply chains or convince consumers to stop buying so many sweatpants, they have helped to cool the market for key purchases like housing and cars somewhat. Without those higher borrowing costs, the economy might have grown even more strongly — giving companies the wherewithal to raise prices more drastically.Now, the question is whether inflation will continue to cool even as the economy hums along at a solid clip, or whether it will take a more marked economic slowdown to drive it down the rest of the way. The Fed itself expects growth to slow substantially next year, to 1.4 percent from 2.6 percent this year, based on fresh projections.“Certainly they’ve done very well, and better than I had anticipated,” said William English, a former senior Fed economist who is now a professor at Yale. “The question remains: Will inflation come all the way back to 2 percent without more slack in the labor and goods markets than we’ve seen so far?”To date, the job market has shown little sign of cracking. Hiring and wage growth have slowed, but unemployment stood at a historically low 3.7 percent in November. Consumers continue to spend, and growth in the third quarter was unexpectedly hot.While those are positive developments, they keep alive the possibility that the economy will have a little too much vim for inflation to cool completely, especially in key services categories.“We don’t know how long it will take to go the last mile with inflation,” said Karen Dynan, a former Treasury chief economist who teaches at Harvard. Given that, setting policy next year could prove to be more of an art than a science: If growth is cooling and inflation is coming down, cutting rates will be a fairly obvious choice. But what if growth is strong? What if inflation progress stalls but growth collapses?Mr. Powell acknowledged some of that uncertainty this week.“Inflation keeps coming down, the labor market keeps getting back into balance,” he said. “It’s so far, so good, although we kind of assume that it will get harder from here, but so far, it hasn’t.”Mr. Powell, a lawyer by training who spent a chunk of his career in private equity, is not an economist and has at times expressed caution about using key economic models and guides too religiously. That lack of devotion to the models may come in handy over the next year, Mr. Gapen of Bank of America said.It may leave the Fed chief — and the institution he leads — more flexible as they react to an economy that has been devilishly tricky to predict because, in the wake of the pandemic, past experience is proving to be a poor precedent.“Maybe it was right to have a guy who was skeptical of frameworks manage the ship during the Covid period,” Mr. Gapen said. More

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    What to Watch at the Fed’s Final Meeting of 2023

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    Federal Reserve officials are widely expected to leave interest rates unchanged, but economists will watch for hints at what’s next.Federal Reserve officials will wrap up a year of aggressive inflation fighting on Wednesday afternoon, when they are expected to use their final policy decision of 2023 to leave interest rates at their highest level in 22 years.The Fed is finishing the year on pause after the most intense campaign of interest rate increases in decades, one meant to snuff out the rapid price gains that have been bedeviling consumers since 2021.Because inflation has now moderated substantially, central bankers have increasingly signaled that they may be done raising borrowing costs, which are set to a range of 5.25 to 5.5 percent. The question investors will be focused on Wednesday is how much rates are expected to come down in 2024 — and when those cuts might begin.The Fed will release its statement and a fresh set of quarterly economic projections at 2 p.m., followed by a news conference with Jerome H. Powell, the Fed chair, at 2:30 p.m. Here’s what to watch.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More