In March, US retail sales rose by 0.7%, surpassing the forecasted 0.3% increase, with a 1% climb excluding gas and autos. Consumers maintained spending at gas stations, grocery stores, and online retailers but reduced expenses at electronics, appliance, clothing, and furniture stores. Despite facing high interest rates and rising prices, Americans continued to spend, potentially due to unchanged spending adjusted for inflation. Former Council of Economic Advisers Chair Kevin Hassett mentioned pressure that could prompt the Fed to raise rates by 1%.
In February, U.S. retail sales increased by 0.6%, lower than expected, following a revised 1.1% decline in January. Consumers are facing high interest rates and rising prices for everyday goods, causing them to be more cautious with their spending. Sales rose in various categories, including electronics and appliance stores, restaurants, and gas stations, but fell in furniture and home stores, clothing retailers, and online shopping. Americans are relying more on credit cards for necessities, with record credit card debt reported. Companies like Walmart and Target are seeing customers prioritize essentials and look for deals.
The U.S. personal consumption expenditures (PCE) index rose 0.3% in January, with prices climbing 2.4% annually but slightly down from the previous month's 2.6%. Core inflation, excluding food and energy, increased by 0.4% monthly and 2.8% annually, the best reading since February 2021. Consumers are slowing spending post-holidays due to high prices. Inflation, measured by the Fed's preferred gauge, increased by 0.3% monthly and 2.4% annually, the lowest in three years. The White House sees the slowdown favorably for President Biden's re-election bid.
Consumer sentiment in the U.S. declined in April with the University of Michigan's index dropping to 77.9 from 79.4 in March. Inflation expectations for the upcoming year increased to 3.1%, surpassing the previous range pre-pandemic. Concerns over inflation outpacing income growth are rising among older Americans. Gas prices contributed to the decline in consumer outlook, with the average price per gallon up 7%. Despite the downturn, sentiment remains relatively high, closely tied to political partisanship. Inflation, excluding volatile costs, remains elevated at 3.8% in March.
In March 2024, job switchers experienced a 10% year-over-year pay increase, the highest since July 2023, while job stayers saw a 5.1% wage gain. ADP's surprise job additions of 184,000 exceeded economist expectations. Economists like ADP's Nela Richardson see resilience in the labor market. The wage growth poses concerns for inflation, potential Fed policy challenges, and economic implications. The labor market strength is crucial for averting recession amidst inflation worries. The report anticipates the March jobs report to show 215,000 job additions and a declining unemployment rate in the US.
In March, U.S. employers announced 90,309 job cuts, a 7% increase from the previous month and the highest monthly total since January 2023. The technology sector was hit the hardest with 14,224 job losses, and layoffs in the government and financial firms also rose. Transportation companies saw a significant increase in job cuts. Companies cited cost-cutting, restructuring, stores closing, poor market conditions, and bankruptcy as reasons for layoffs. Despite a historically tight labor market, job growth has slowed, with companies planning to add fewer positions. The U.S. unemployment rate is expected to remain at 3.9%.
Kevin Allen Hassett (born March 20, 1962) is an American economist who is a former Senior Advisor and Chairman of the Council of Economic Advisers in the Trump administration from 2017 to 2019. He has written several books and coauthored Dow 36,000, published in 1999, which argued that the stock market was about to have a massive swing upward and would reach 36,000 by 2004. Shortly thereafter, the dot-com bubble burst, causing a massive decline in stock market prices. The Dow finally did reach 36,000 as the Covid pandemic receded in late 2021.Hassett has worked at the American Enterprise Institute, a conservative think tank. He was John McCain's chief economic adviser in the 2000 presidential primaries, as well as economic adviser to the 2004 campaign of George W. Bush and 2008 campaign of McCain. He was an economic adviser on Mitt Romney's 2012 presidential campaign.In the Trump administration, Hassett was the 29th Chairman of the Council of Economic Advisers from September 2017 to June 2019. He returned to the White House in 2020 to work on the administration's response to the coronavirus pandemic. Hassett did not focus on public health policy, but rather influenced the administration's response from an economic angle amid lockdowns and social distancing. Hassett built a model that indicated that COVID-19 deaths would drop off to near zero by May 2020. Hassett's model contradicted assessments by public health experts, and was widely panned by academics and commentators.
Despite the Federal Reserve's efforts to cool the labor market, the number of Americans applying for jobless benefits decreased by 11,000 to 211,000 last week. The four-week average of claims also fell to 214,250. In March, the U.S. added 303,000 jobs, reducing the unemployment rate to 3.8%, marking the longest streak of staying below 4% since the 1960s. However, companies like Google, Apple, Amazon, and others have recently announced layoffs, with a total of 1.82 million Americans collecting jobless benefits by the end of March.
On Tax Day, the IRS highlights customer service improvements following increased funding from the Democrats' Inflation Reduction Act, including reduced phone wait times and a more informative 'Where's My Refund' tool. Treasury Secretary Janet Yellen commends the IRS for reaching new milestones this filing season, with over 100 million tax returns received. Despite success, the agency faces funding threats from congressional Republicans, potentially jeopardizing services. Recent initiatives target high-wealth earners evading taxes, while a new program, Direct File, aims to simplify tax filing for Americans. Government watchdogs caution that IRS funding cuts may reduce U.S. revenue.
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