KPI – August 2024: State of the Economy
Nearly 28% of surveyed consumers sacrificed rent or bills to afford food...
KPI – August 2024: Recent Vehicle Recalls
KPI – August 2024: State of Business
KPI – August 2024: State of Manufacturing
KPI – August 2024: Consumer Trends
State of the Economy
In July, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% on a seasonally-adjusted basis following a 0.1% decline in June, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, the all-items index increased 2.9% before seasonal adjustment.
Important Takeaways, Courtesy of the U.S. Bureau of Labor Statistics:
- The index for shelter rose 0.4% in July, accounting for nearly 90% of the monthly increase in the all- items index. In addition, the index for food, plus food-away-from-home, both increased 0.2%, while the food-at-home index increased 0.1%.
- Indexes on the climb include shelter, motor vehicle insurance, household furnishings and operations, education, recreation and personal care, while indexes on the decline include used cars and trucks, medical care, airline fares and apparel.
- The all-items index rose 3% year-over-year, with the all-items less food and energy index up 3.3%. The energy index inched up 1% year-over-year, while food increased another 2.2%.
The all-items index rose 2.9% year-over-year, the smallest 12-month increase since March 2021. The all-items less food and energy index climbed 3.2%, while the energy index increased 1.1% and the food index rose 2.2% over the year.
For perspective, recent data shows food prices are on the climb 25.8% since November 2020. The cost of meat, poultry, fish and eggs, for example, collectively increased 23.5% since the last election. Eggs are up 54%, while dairy products like milk, cheese and butter rose upwards of 36%. Similarly, cereals and bakery products such as bread, rolls, crackers and cookies jumped 28% during the last four years.
“So, while the latest 2.2% annual food inflation rate for March 2024 seems more manageable, it doesn’t negate the cumulative 25.8% increase in grocery prices since that November 2020 election. And it remains to be seen if that downward trend in food inflation will continue in the coming months,” according to Laura Beck, author of Here’s How Much Grocery Prices Have Increased Since the Last Election.
“With the significant rise in food costs over the past few years, American households have been forced to spend a bigger share of their income on basic grocery items. Tighter budgets due to higher prices have financial impacts that ripple through the entire economy. As the data so clearly shows, a routine trip to the grocery store is a much more expensive these days than it was just a few years ago,” she continues.
Some consumers are sacrificing necessities to afford food, according to a recent survey hosted by Qualtrics on behalf of Intuit Credit Karma.
- 28% forewent other needs such as monthly rent or bills
- 27% occasionally skipped meals
- 18% applied for or considered applying for food stamps, while 15% currently rely on or considered turning to food banks
Despite significant hardship, “53% [of survey respondents] indicated they earn too much to qualify for food stamps or other government assistance, yet still have difficulties paying for necessities,” says Lorie Konish, contributor at CNBC.
In addition to food prices, consumers also report unsustainable cost increases in gasoline, cable, electric, internet, housing and dining-out.
Employment
Total nonfarm payroll employment inched up by 114,000 in July – well below the Dow Jones estimate of 185,000 and the softest annual data to date. As such, the unemployment rate and number of unemployed persons increased again month-over-month to 4.3% and 7.2 million, respectively – the former of which is the highest since October 2021. Once again, job growth was concentrated in health care, social assistance and government, with a positive performance in construction and small monthly changes across other industries.
In addition, the labor force participation and long-term unemployed (those jobless for 27 weeks or more) rates rose to 62.7% and 21.6%, respectively, according to the U.S. Bureau of Labor Statistics. Average hourly earnings increased 0.2% for the month and 3.6% year-over-year – below forecasts of 0.3% and 3.7%. Moreover, regular monthly job revisions continue to be a troubling trend, according to industry professionals. Most recently, the Bureau downwardly revised the June jobs gain from 206,000 to 179,000.
“Temperatures might be hot around the country, but there’s no summer heatwave for the job market,” says Becky Frankiewicz, president of the ManpowerGroup employment agency. “With across-the-board cooling, we have lost most of the gains we saw from the first quarter of the year.”
Caption: Throughout 2023, negative revisions within the monthly jobs report subtracted more than 440,000 jobs from the initial total. The concerning practice continues in 2024, as the Bureau revised its data by 57,000 in April, lowering its previous estimate of 165,000 jobs added to 108,000. Likewise, May payroll estimates were revised down 54,000 jobs – decreasing total job gains from 272,000 to 218,000. That is a combined 111,000 fewer jobs in April and May than first reported, which brings the three-month average of job gains to roughly 177,000 – well below the 269,000 recorded during the first three months of the year.
The report further complicates mixed signals about the overall health of the economy, with consumers undeniably shouldering pricing pressures, financial markets on edge, and the Federal Reserve withholding rate drops.
“The report adds to mounting evidence that the economy is weakening in the face of ongoing inflation and high interest rates. Stock futures plunged as the report reignited fears of an impending recession, with Dow futures shedding more than 500 points,” explains Megan Henney, contributor at Fox Business.
Of concern, the monthly rise in unemployment triggered the Sahm Rule – a reliable indicator used to provide an early recession signal. Created by economist Claudia Sahm, the concept specifies that a recession is likely when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low. Over the past three months, the unemployment rate averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023.
While some leaders across critical markets are leery or unwilling to label current economic times as recessionary, Henney notes the Sahm Rule has successfully predicted every recession since 1970.
Source: U.S. Bureau of Labor Statistics data
By Demographic
This month, unemployment rates among the major worker groups: adult women – 3.8%; adult men – 4%; teenagers – 12.4%; Asians – 3.7%; Whites – 3.8%; Hispanics – 5.3%; and Blacks – 6.3%.
Last month, unemployment rates among the major worker groups: adult women – 3.7%; adult men – 3.8%; teenagers – 12.1%; Asians – 4.1%; Whites – 3.5%; Hispanics – 4.9%; and Blacks – 6.3%.
*Data is bold reflects notable unemployment increases.
Caption and Image Source Credited to Indeed: A line chart titled “The unemployment rate is starting to pick up speed” covers data from January 2019 to July 2024. The chart shows that the unemployment rate spiked during the initial COVID shock and then declined significantly — until recently — when it started to increase again, reaching 4.3% in July 2024. The 2019 average unemployment rate was 3.7%.
By Industry
The Employment Trends Index™ (ETI) has been on a downward trajectory since its peak in March 2022, with some industry professionals preparing for an employment decrease in the second half of 2024.
“July’s decline in the ETI is consistent with the normalization that is occurring across labor market metrics, including the ongoing moderation of payroll gains. The ETI remains above the pre-pandemic trend but is steadily reverting toward 2019 and early-2020 levels. Thus, the signals of softening that have emerged so far remain well within historic ranges and do not portend broader deterioration,” says Mitchell Barnes, economist at The Conference Board.
While the labor market is clearly cooling from its “torrid post-pandemic pace,” Barnes says labor hoarding continues despite rising labor costs.
“Companies continue to face difficulties finding workers: The share of small firms that report jobs are ‘not able to be filled right now’ (a component of the ETI) stood at 38% in July, down from 42% in May but well above the July 2009 – January 2020 average of 23%. This share is expected to remain elevated due to an aging workforce, labor hoarding, and talent shortages,” he adds.
Caption: The Conference Board Employment Trends Index™ (ETI) decreased to 109.61 in July, from
an upwardly revised 110.58 in June. The Employment Trends Index is a leading composite index for payroll employment. When the Index increases, employment is likely to grow as well, and vice versa. Turning points in the Index indicate that a change in the trend of job gains or losses is about to occur in the coming months.
Important Takeaways, Courtesy of the U.S. Bureau of Labor Statistics:
- Health care added 55,000 jobs in July, with employment up in home health care services (+22,000), hospitals (+20,000) and nursing and residential care facilities (+9,000).
- Employment in construction jumped (+25,000), with specialty trade contractors driving the increase (+19,000).
- Employment in transportation and warehousing is up (+14,000), with job gains in couriers and messengers (+11,000) and warehousing and storage (+11,000). These gains were partially offset by a job loss in transit and ground passenger transportation (-11,000).
- Employment in social assistance rose (+9,000).
- Government employment continues to post monthly gains (+17,000).
