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Economic Commentary

High-frequency data show little slack for labor: Weekly Economic Review & Outlook

February 13, 2023
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Last week was light on economic news and indicators. In the most noteworthy event of the week, Fed Chair Jerome Powell reiterated that the FOMC intends to keep monetary policy restrictive for some time as the journey to restore price stability will be lengthy. Also, consumer sentiment moved up modestly—likely due to the strong labor market—but it is still being held back by elevated inflation and recession fears.


Key Takeaways:

What we learned last week: (pg. 1)

Jobless claims remain very low

The four-week moving average for initial jobless claims fell for a ninth straight week in early February, reaching its lowest level since April.

Consumer sentiment climbs for third straight month

Consumer sentiment climbed due to the strength in the labor market, but consumers remain concerned about an oncoming recession.

What we’re watching this week: (pg. 2)

February 14: Consumer Price Index

Consumer prices to rise after brief price relief

After a welcomed two months of deceleration, the CPI is expected to increase 0.5 percent in January. Gasoline prices turned up around 3.5 percent and food prices likely continued to rise at a moderate rate with the combination of the two boosting the headline reading. Rent and new vehicles should also post moderate increases, helping to push core CPI 0.4 percent higher. Used car prices, which have been declining sharply over the past several months, are likely to flatten out, lessening their drag on core inflation. While the year-on-year measures for the CPI and core CPI should edge down in January, they will remain highly elevated and keep pressure on the Fed to keep raising interest rates.

February 15: Retail Sales

Jump in auto sales should boost total retail sales

December saw a pullback in retail spending, raising concerns that the economy was losing momentum with the Fed’s aggressive tightening actions. However, retail sales are expected to be strong in January due to the pop in personal disposable income driven by the increases in employee headcount, the average workweek, and average hourly earnings over the month. Rising big-ticket purchases, especially the sharp 18 percent jump in unit auto sales during January, should boost the headline sales figure relative to core sales.

February 16: Housing starts

Housing starts still feeling the weight of higher mortgage rates

High mortgage rates are keeping buyers from seeing out new single-family homes and home builders anticipate less foot traffic this spring. The lack of affordability continues to adversely affect housing demand as well as supply. However, the pullback in mortgage rates in January might boost building permits even though housing starts likely declined on the month.