Wells Fargo's Economics Group says there is less demand for workers in the US, with job openings at the lowest level since 2020. They warn that more layoffs might happen as companies try to save money. They predict that in January, the number of jobs added will be 80,000 and the unemployment rate will be 4.4%. For inflation, they expect the core CPI to rise by 0.33% and the overall CPI to rise by 0.25%, which would bring the yearly inflation rate down to about 2.5%.
Labor softness and sticky inflation.
Companies that are trying to save money might now have to let go of some employees if they can't find other ways to cut costs. They've already reduced the number of new workers they're hiring, and not many people are leaving on their own. The usual signs that show companies are hiring or firing people aren't pointing to a lot of activity. For example, the JOLTS report, which tracks layoffs, shows a low rate of 1.1%, and the number of people filing for unemployment early has dropped by 2.5% compared to last year.
While big layoffs aren't our main expectation, it's still possible that claims could go up a little as labor demand gets worse.
We have seen that lowering interest rates probably leads to more spending on capital, which can help the manufacturing industry. But the improvement in January might have been because companies restocked supplies instead of showing a real increase in demand.
We expect the main index to go up by 0.33% this month, which is higher than the average increase of 0.22% seen over the last year. Although some of this growth might be due to seasonal factors, other reasons like businesses catching up on restocking, companies passing on higher tariffs to customers, and testing their ability to raise prices also play a role in the expected increase.
The overall CPI should rise by a smaller 0.25%, showing slower increases in food prices and lower gas prices, but energy services are expected to keep going up. This smaller monthly increase in overall inflation should bring the yearly rate down to 2.4%.
Labor softness and sticky inflation.
Companies that are trying to save money might now have to let go of some employees if they can't find other ways to cut costs. They've already reduced the number of new workers they're hiring, and not many people are leaving on their own. The usual signs that show companies are hiring or firing people aren't pointing to a lot of activity. For example, the JOLTS report, which tracks layoffs, shows a low rate of 1.1%, and the number of people filing for unemployment early has dropped by 2.5% compared to last year.
While big layoffs aren't our main expectation, it's still possible that claims could go up a little as labor demand gets worse.
We have seen that lowering interest rates probably leads to more spending on capital, which can help the manufacturing industry. But the improvement in January might have been because companies restocked supplies instead of showing a real increase in demand.
We expect the main index to go up by 0.33% this month, which is higher than the average increase of 0.22% seen over the last year. Although some of this growth might be due to seasonal factors, other reasons like businesses catching up on restocking, companies passing on higher tariffs to customers, and testing their ability to raise prices also play a role in the expected increase.
The overall CPI should rise by a smaller 0.25%, showing slower increases in food prices and lower gas prices, but energy services are expected to keep going up. This smaller monthly increase in overall inflation should bring the yearly rate down to 2.4%.
