💸😟 Inflation Expectations Highest Since '08
Happy Sunday,
Despite widespread predictions of economic slowdown, 2024 ended with surprising resilience in the US job market. However, while hiring stayed strong, cracks are forming elsewhere—consumer inflation expectations just hit a 16-year high, and Europe’s clean energy ambitions are facing a major setback due to negative power prices.
Let’s break it down!
- Humphrey & Rickie
Market Report
US Hiring Stayed Strong in 2024 With 2.2 Million Job Gains
Despite nationwide sentiment regarding the job market, US hiring showed remarkable resilience in 2024, adding 2.2 million jobs, defying expectations of a slowdown.
Nonfarm payroll employment increased by 1.4% annually, with an average monthly gain of 186,000 jobs. This pace, while slower than 2023's average of 250,000 jobs per month, still exceeded pre-pandemic levels and outperformed many analysts' predictions.
The job market's momentum was particularly strong in health care and social assistance, which accounted for over 40% of net new hiring, followed by government employment at nearly 20%.
US Consumer Inflation Expectations Jump to Highest Since 2008
The University of Michigan's preliminary January survey reveals a significant increase in US consumers' long-term inflation expectations, reaching the highest level since 2008.
Americans now anticipate prices to rise at an annual rate of 3.3% over the next five to 10 years, up from 3% in December, with the same rate expected for the coming year.
This surge in inflation expectations was primarily attributed to concerns about potential tariffs from the incoming Trump administration, with nearly one-third of consumers spontaneously mentioning tariffs, a substantial increase from previous months.
22% of respondents indicated they would purchase big-ticket items now to avoid future price hikes, matching the highest level since 1990.
The survey also showed a decline in income expectations and increased pessimism about unemployment, with half of the respondents expecting unemployment to rise in the coming year.
Europe’s Negative Power Prices Undermine 2030 Clean Energy Goals
According to market analytics firm Aurora Energy, Europe is likely to miss its 2030 clean energy targets due to increasing instances of negative electricity prices, which are discouraging investment in new renewable projects.
“On the sunniest or windiest days, electricity can flood the grid, which causes prices to turn negative and users can be paid to consume” - Bloomberg
The issue is partly due to outdated subsidy schemes incentivizing renewable generators to continue producing even when prices drop below zero, further distorting the market.
The problem can also be exacerbated by grid congestion and curtailment, particularly affecting the UK and Germany, where energy generation sometimes has to be halted due to insufficient infrastructure to transport it to areas of demand.
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