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Weekly economic review & outlook Jobs: a year like no other

January 10, 2022

You Need to Know

Week in review

The unemployment rate continues to fall

The unemployment rate fell to 3.9 percent for December and is now close to the previous cycle low.

The ISM manufacturing prices index plummeted

Pricing pressures remain elevated but have receded dramatically since June, falling by more than 20 percentage points.

Week Ahead

Forecasts

CPI gains likely strong again for December

We project the CPI jumped by 0.5 percent for December, with an increase in the core rate — which excludes the volatile food and energy components — of 0.4 percent. This would bring the 12-month change for these rates to 6.9 percent and 5.3 percent, respectively.

Retail sales should climb despite slipping auto sales

Total sales were probably held back a bit by a decline in auto sales but rising prices for autos should offset this to some extent. We project an increase of 0.4 percent in total retail sales, and 0.6 percent in retail sales excluding autos.

Industrial production (IP) expected to slip with unseasonably warm December weather

Even with an expected gain in energy production (with still high oil prices), we project a decline in IP of 0.6 percent. This would result in IP ending 2021 slightly above its level prior to the start of the pandemic.

With data going back to 1939, no year saw more jobs added than 2021. Of course, this followed an even larger Covid-caused drop in the prior year (also a record). By most measures, the labor market is tight even if nonfarm payrolls are not back to pre-pandemic levels (with much lower labor force participation). Unemployment continues to move lower while wage gains remain elevated. Purchasing manager surveys show that demand remains robust (even if more muted) while prices on the goods manufacturing side have started to ease. Supply chains and labor shortages remain major headwinds for the economy, but there are early signs of easing pressures.

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