The Pitch: Economic Update for December 5th, 2024
Friends,
I hope you had a wonderful Thanksgiving with family and friends. And the odds are good that you spent at least some of the past weekend doing some holiday shopping — either in brick-and-mortar stores or online.
“Slightly fewer people shopped during this year’s Thanksgiving weekend compared with 2023, when a record 200 million people shelled out for the holidays, according to a survey released on Tuesday by the National Retail Federation,” writes the New York Times’s Danielle Kaye. “The data showed that an estimated 197 million people shopped during the five-day period from Thanksgiving Day to Cyber Monday.”
There were fewer shoppers, but those shoppers spent more money individually, “almost 15 percent more online on Black Friday from the previous year,” Kaye writes. “In-store sales were also up but more modestly, at 0.7 percent, for an overall increase of 3.4 percent.” In total, “Consumers spent an average of $235 on gifts for the holidays — $8 more than in 2023 — with almost half spent on clothing or accessories.”
These numbers are fairly healthy, though retail CEOs are using adjectives to describe consumer behavior that should send up some warning flares. “An executive at Target described consumers as shifting from ‘resilient’ to ‘resourceful,’ and a leader at Walmart said shoppers ‘seek value to maximize their budgets.’”
One factor that isn’t included in the instant Black Friday totals is how much of that spending was done on credit cards or through “buy-now-pay-later” programs. But we’re seeing some information that suggests consumers might be getting in over their heads with holiday gift shopping. Specifically, roughly one in three consumers are still carrying debt from last year’s holiday shopping.
“In one holiday shopping survey, the personal finance site WalletHub found that 47% of consumers still carry debt from last holiday season. In another poll, NerdWallet found that 28% of consumers who used cards to buy gifts in 2023 haven’t paid off their balances,” reports Daniel De Visé at USA Today. “A third survey, from Intuit Credit Karma, found that one-third of consumers are heading into the holidays with at least $5,000 in debt.”
Consumer spending powers our economy, and the holiday season is a huge driver of that spending. It’s the sales bump that many retailers — especially small neighborhood businesses — need to turn into profitability for the year. (It’s called Black Friday because the day after Thanksgiving is the day of the year when many retailers finally start making money, shifting their ledgers from the red into the black.) In turn, that spending powers job creation in the retail, manufacturing, and distribution sectors.
But not all spending is good. If corporations raise the prices of goods far above costs in order to plump up their profit margins, or if too much of that spending is made with inflating credit limits that could potentially put people’s economic health at risk, it can run at odds with what consumer spending should do in a healthy economy. In other words, consumer spending should benefit the American working class, not CEOs and elite shareholders or big financial institutions that rig the credit game in their own favor.
The Latest Economic News and Updates
Inflation Refuses to Settle Down
Inflation rose last month, according to Jeanna Smialek at the New York Times. “The Personal Consumption Expenditures index climbed 2.3 percent from a year earlier, quicker than 2.1 percent in September,” she writes. That’s data that led Fed Governor Christopher Waller to sound a note of caution: “After making a lot of progress over the past year and a half, the recent data indicate that progress [in fighting inflation] may be stalling,” Waller announced.
“Officials had previously expected to lower rates to 3.4 percent by the end of 2025, from about 4.6 percent now,” Smialek writes, but after Waller’s statement, “analysts and investors increasingly expect policymakers to revise their forecasts following their December meeting, predicting fewer rate cuts in the months to come.”
Waller doesn’t speak for the whole Fed, though. Axios reports that New York Fed President John Williams believes that inflation will continue to decline: “If you strip out housing, food and energy costs, inflation rates are ‘roughly consistent’ with those seen from 2002–2007, Williams said.”
That’s a huge, glaring “if,” though. Housing is easily the single biggest inflationary cost that most Americans are facing right now. Axios reports that Williams believes “housing price pressures keeping inflation elevated should subside as more up-to-date data is folded into government reports,” but it’s hard to reckon that interpretation with all the data that shows America needs millions more new housing units simply to meet current demand.
So we’re stuck yet again at an impasse: The Fed might keep interest rates higher in a misguided attempt to lower prices, even though housing prices are the biggest problem for most Americans, and housing prices are inflated in part because the Fed has kept interest rates artificially high, making it more expensive to take out mortgages.
Right now, as we noted in the introduction, consumer spending seems to be holding steady. But if prices stay high, paychecks stay flat, and Americans don’t get housing price relief sometime soon, the economy could be heading into turbulence.
The Labor Market Keeps Drifting Downward
The October Job Openings and Labor Turnover Survey was released this week, and it appears to be on trend with all the other job data we’ve seen in recent months. “There were 7.7 million job openings on the last day of October, up slightly from September,” Ben Casselman posted. “But September was revised down, and the trend here is clearly (and quite sharply) downward.”
More Americans quit their jobs in October than in recent months, which is a positive sign demonstrating that Americans feel more confident about the labor market than they did this summer. But Casselman notes that “quits are meaningfully below their prepandemic rate.” And layoffs remain far below pre-pandemic numbers, which is another good sign for workers.
There are some warning signs. “Hires continue to fall. Some of that may be mechanical — fewer people quitting means fewer people being hired to replace them,” Casselman writes. “But it also suggests labor demand is softening even as layoffs remain low and openings remain (relatively) high.” When taken as a whole, the labor market continues its downward drift.
So the labor market is still healthy at the moment, but remember that all those numbers correspond to workers in the real world, and the spending power of those workers is what drives our economy. This would be the time for leaders to enact some policy proposals that raise worker wages, because we don’t want to be stuck in a downward spiral of unemployment and shrinking paychecks — particularly at a time when housing prices are near all-time highs.
A Former Obama Staffer Rings the Alarm Bell for the American Economy
You’ll note that I have alluded several times to the fact that the American economy is on tender footing. You don’t have to just take my word for it, though. Steven Rattner, who served in President Obama’s Treasury Department, wrote an economic warning for the incoming Trump Administration in the New York Times.
Rattner has some personal experience with economies that are on rough footing. In the years after the Great Recession, the Obama Administration oversaw the slowest economic recovery in American history, in large part because neoliberals in the Administration and in Congress opted to direct recovery funds to the wealthy few at the top, not the paychecks of American workers. (Compare the slow Obama recovery with the fastest-in-history economic recovery that President Biden oversaw from the pandemic, which was powered by direct investments in working Americans.)
“It’s becoming increasingly apparent that the fruits of the economy’s steady expansion are not reaching most Americans,” Rattner writes. “A growing share of our overall prosperity continues to accrue to the wealthy and to corporate shareholders (as evidenced in part by the extraordinary upward march of stock prices).”
Rattner does a capable job of laying out the problems that many workers face. On average, pay for all Americans has risen slightly over the past 45 years, but “pay for men with only a high school education has fallen to $1,006 per week before Covid from $1,293 in 1979,” he writes.
The most damning fact that Rattner lays out is about the precarity of the American Dream — the idea that children will have a chance to enjoy more prosperity and economic security than their parents. A child born in 1940, Rattner explains, had a 92% chance of doing better than their parents. But a child born in 1980 is basically facing a coin flip, with a 50% chance of improving their economic outcomes compared to their parents.
Measured by virtually every metric, including home ownership and the wealth gap, Rattner explains that working Americans are on very precarious economic footing. And he correctly attributes it to 45 years of trickle-down economic policies that have taken tens of trillions of dollars from the paychecks of working Americans and enlarged the fortunes of the wealthiest 1 percent.
Rattner predicts that Trump’s stated policies of increased tariffs, rampant deregulation, and tax cuts for the wealthy will only exacerbate the inequality that has grown over the last 45 years. Instead, Rattner offers some policy solutions for Trump, including “more progressive taxation,” which is definitely a middle-out economic solution. I completely agree that the tax code needs to be rewritten so that it doesn’t favor a wealthy few over everyone else.
I’m less impressed with another of Rattner’s suggestions: The idea that “more education and more training” is the solution for growing the paychecks of American workers. Improving access to college education and offering training to workers who have lost their jobs has been a pillar of Democratic economic platforms since at least the Clinton presidency, and they just haven’t resulted in great outcomes for American workers.
The best way to grow American paychecks is to enact policies that get more people working for more money. That means raising the federal minimum wage away from the paltry $7.25 an hour that it has been stuck at since the Obama administration. It means making huge investments in infrastructure, manufacturing, and housing — solving our biggest problems by investing in the American workforce. It means fighting the corporate consolidation that has resulted in the mass offshoring of American jobs and a lack of competition in the labor market that has driven paychecks downward.
The Biden Administration did act on many of these policies, of course, but workers didn’t feel the full effects of those three years of investments because they’re still buried under 45 straight years of trickle-down economic policies, along with a worldwide inflation crisis caused by the pandemic. Because those policies didn’t yield instantaneous results, some neoliberals are pushing to move away from middle-out economics and toward the trickle-down policies of the past. But the lesson for Rattner and for the rest of the Democratic Party should be that you can’t fight trickle-down with a slightly more beneficial flavor of trickle-down. You can only fight trickle-down policies that enrich the wealthy with middle-out economic policies that grow the paychecks of workers.
This Week in Middle-Out
- “The Biden administration on Tuesday moved to end a program that has for decades allowed companies to pay workers with disabilities less than the minimum wage,” reports the New York Times. It remains to be seen if the rule will survive court challenges or whether the Trump Administration will reverse it. This is an issue, like the minimum wage, that can and has been dealt with in local jurisdictions. Both my home state of Washington and my home city of Seattle have made good strides toward pay fairness for disabled workers, with Seattle outright eliminating the subminimum wage.
- The White House celebrated a milestone on Monday: “$1 trillion of private sector money put toward clean technology and manufacturing — investments officials say are a result of Biden-era legislation,” according to Axios.
- “With just weeks left in office, Mr. Biden and his aides have emphasized that his signature economic legislation, the Inflation Reduction Act, overwhelmingly benefits Republican districts, in the hopes that Mr. Trump would face blowback from his own party if he repealed it,” reports the New York Times. “The administration is also racing to award hundreds of millions of dollars in grants and finalize environmental regulations to lock in Mr. Biden’s economic agenda, including ramping up domestic manufacturing of clean energy products and semiconductors.”
- The automotive industry is also asking the Trump Administration to keep Biden-era tailpipe standards in place to promote the adoption of electric vehicles.
- Donald Trump is continuing the Biden Administration’s opposition to Japanese firm Nippon Steel’s proposed purchase of US Steel. And the Biden Administration is announcing tighter restrictions on exporting American semiconductor technology to China.
- Matt Stoller digs deep into the Department of Justice’s proposal to break up Google, including making the Chrome browser and potentially the Android operating system into free-standing companies.
- New York City seems set to loosen zoning restrictions and put $5 billion into building more housing. Assuming this passes, most American cities will be watching New York closely as they wrestle with their own housing crises.
- A Delaware judge again blocked Tesla CEO Elon Musk’s proposed largest-in-history $56 billion bonus package.
This Week on the Pitchfork Economics Podcast
Gregg Colburn, co-author of “Homelessness is a Housing Problem,” joins Nick and Goldy this week to talk about, far and away, the biggest contributor to homelessness: Housing prices. He explains how a trifold approach of affordable housing, rental assistance, and supportive services can help local governments get people off the streets and into housing.
Closing Thoughts
If you want to learn what an elected official’s true goals are, you should pay close attention to the people they hire for their staff once they’re in office. The signature achievement of Donald Trump’s first term was a huge trickle-down tax cut for wealthy people and corporations. And for his second term, Trump isn’t just hiring people who will fight for the wealthy and powerful — he’s installing the wealthy and powerful themselves into the positions that determine our economic policy.
Trump is assembling the wealthiest White House staff in American history. The New York Times reports that “Scott Bessent, who invested money for [billionaire George] Soros for more than a decade, is his pick for Treasury secretary, and Howard Lutnick, the chief executive of Cantor Fitzgerald, will be nominated to lead the Commerce Department.” It is highly unlikely that billionaire hedge fund managers will choose to invest in working Americans over their elite peers.
In fact, William Birdwhistle writes in the New York Times, “Trump’s family, fund-raisers and financial lieutenants are more likely to be [private equity, hedge and venture capital] fund managers than any prior presidency, including his first term.”
And it’s not just Trump’s economics team that’s wealthy: “the combined wealth of President-elect Trump’s wealthiest nominees and transition team officials–along with himself and his Vice President, JD Vance–amounts to over $313 billion,” reports Americans for Tax Fairness. “Even excluding Elon Musk — the world’s richest man and Trump’s Co-Director of the Department of Government Efficiency — the average net worth of Trump, his vice president and top appointees is $616 million.”
“All of these appointees have signed onto the Trump administration’s plan to extend the parts of the Trump’s 2017 tax law that expire at the end of 2025,” Americans for Tax Fairness notes. “The benefits of that extension would be heavily concentrated among wealthy people like them and hike the public debt by some $5 trillion.”
“Trump has also proposed cutting the corporate tax rate to 15% for some corporations, which would cost some $200 billion more,” they continue. “Republicans consistently use deficits as an excuse to cut public services they don’t like, including Social Security and Medicare.”
It seems that 45 years of neoliberal politicians handing tax cuts and deregulation to the super-rich wasn’t enough for the wealthiest .01%. They had to get in there and grab hold of the reins of power themselves.
You’ve probably seen some news stories about one of Trump’s rare cabinet appointments who isn’t a billionaire or even merely a centimillionaire: Representative Lori Chavez-DeRemer of Oregon, who Trump nominated for the Department of Labor position. The New York Times reported that Republicans were unhappy with her nomination because she “was one of only three Republicans to cosponsor the PRO Act, which protects workers’ right to organize. She also cosponsored the Public Service Freedom to Negotiate Act, which requires all states to recognize public-sector unions.”
Chavez-DeRemer has been hailed by some as a rare bright spot for American workers in the incoming Trump Administration. But the American Prospect’s Hassan Ali Kanu explains that her full record isn’t as pro-worker as it first appears: “according to the AFL-CIO’s congressional ratings, Chavez-DeRemer voted for policies that favor workers just 10 percent of the time, only slightly higher than the 6 percent score for the average House Republican.”
Chavez-DeRemer “voted in favor of a bill that would undermine the unemployment insurance program,” Kanu writes, “including by penalizing recipients for inadvertent errors; and for legislation that would loosen regulation of health benefits and allow employers to offer plans that aren’t backed by adequate reserves.”
Additionally, she “has also voted against one of the biggest labor priorities of the past decade — a ‘joint employer’ rule to restrict companies’ ability to effectively outsource certain legal, pay, and benefits obligations to third parties, like contractors and franchisees.”
So it remains to be seen whether Chavez-DeRemer will offer American workers anything more than the occasional encouraging word, but her record indicates that she’s not willing to do the work on the lower-profile policies that are essential to preserving worker power.
It matters who makes the rules. That’s why in government, inclusion is so important. If you have lawmakers who can speak to the diverse lived experiences of Americans, their laws are going to be more relevant and fairer for everyone. If you’re building a government of rich people, the odds are good that the rules are going to be tipped in favor of the wealthy and powerful. During his campaign, Donald Trump claimed that he’s going to look out for the American worker, but when it comes to building his cabinet, he’s made it clear that there’s no room for working people at his table.
Onward and upward.
Zach
No Place Like Malls for the Holidays was originally published in Civic Skunk Works on Medium, where people are continuing the conversation by highlighting and responding to this story.