The Pitch: Economic Update for January 9th, 2025
Friends,
Let’s officially start 2025 off with some good news: On January 1st, tens of millions of Americans got a raise. Axios reports that 21 states and 48 cities and counties raised their minimum wages when the clock struck midnight on New Year’s Eve. In 8 of those states and all but one of those cities and counties, the minimum wage has now risen above $15 per hour.
These widespread wage increases are not just good news for the millions of Americans whose paychecks directly increased due to these raises, writes Emily Peck: “Millions more will benefit. When the wage floor rises, that means pay goes up for other workers at the bottom of the income ladder, too.”
And while 19 of the 20 states that still keep their minimum wage at the federally established level of $7.25 voted for Trump in the 2024 election, other red states have raised their wages, too. “Pay is rising to $14.70 in Arizona, $10.55 in Montana, $13.50 in Nebraska and $10.70 in Ohio,” Peck reports. She notes that by January 1st, 2027, “nearly half of U.S. workers will live in states with at least a $15 minimum wage.”
Raising the minimum wage is popular across party lines. The false trickle-down claims that raising the minimum wage kills jobs has fallen out of favor with working Americans. That doesn’t mean that trickle-downers aren’t trying to scare people into voting against their own best interests. Rogé Karma wrote for the Atlantic about the pushback against California’s new $20 minimum wage for fast-food workers:
“Let me give you the downside,” Donald Trump responded when recently asked whether he would agree to raise the federal minimum wage during his second term. “In California, they raised it up to a very high number, and your restaurants are going out of business all over the place. The population is shrinking. It’s had a very negative impact.”
Except it hasn’t. In the six months after California’s new minimum wage came into effect in April, the state’s fast-food sector actually gained jobs. If anything, it proves that the minimum wage can be raised even higher than experts previously believed without hurting employment. That should be good news. Instead, the policy has been portrayed as a catastrophic failure. That is a testament to how quickly economic misinformation spreads — and how hard it is to combat once it does.
Karma explains that the right-wing Hoover Institution published multiple reports based on faulty data showing that California lost 10,000 fast-food jobs after the state’s minimum wage went up, when in fact the state gained 5,000 jobs. As I mentioned last month, Hoover retracted the articles after anonymous blogger Invictus repeatedly proved that their job-loss numbers were wholly inaccurate.
But the damage has already been done: Countless articles based on the bad data in those retracted reports are out there on the internet for anyone to find, which gives trickle-downers like Trump enough space to just blatantly lie that raising the wage will supposedly harm the very people it’s intended to help.
“Notwithstanding the law’s broadly positive real-world consequences, the nonstop negative press about it has turned it into a political liability,” Karma reports. “In November, California voters narrowly rejected a ballot measure that would have raised the state’s minimum wage for all industries to $18 an hour, following a massive industry-led campaign centered on the claim that the state’s fast-food minimum-wage experiment had been a disaster.”
These attempts to smear the minimum wage were temporarily successful, but too many Americans now understand the truth about the minimum wage. On New Year’s Day, Americans in at least 20 states saw the benefits of living in a high-wage economy. They understand that when workers have enough money to buy the products and services they produce, the economy grows for everyone.
There’s a reason why the Fight for $15 was most Americans’ first contact with middle-out economics as an alternative to trickle-down. The minimum wage is the clearest example of what middle-out economics looks like in practice. And that’s also why so many bad actors, from Donald Trump on down to Pizza Hut owners in California, are so invested in trying to restore trickle-down fears of raising the wage — because they’re afraid that a critical mass of people will realize that wealth never trickles down from the wealthy few at the top. Instead, it grows from the middle out.
The Latest Economic News and Updates
America’s Homeless Population Reaches a Startling New High
“U.S. homelessness increased 18% this year, according to federal data released on Friday, with children being the age group that experienced the largest increase,” reports Axios. “More than 770,000 people experienced homelessness on a single night in January 2024, per the point-in-time survey. Nearly 150,000 children experienced homelessness when the survey was taken, reflecting a 33% increase over 2023.”
The Department of Housing and Urban Development report (PDF) does show several positive signs among specific populations. The number of unhoused Black Americans declined from 37% in 2023 to 32% in 2024. And the unhoused veteran population continues to drop, with an 8% decrease reported this year. In fact, the total unhoused veteran population has declined by more than 55% from 2004 to 2024.
These shifts demonstrate that while the ever-growing number of unhoused Americans feels like an out-of-control problem, we know how to create and enact policy that gets people into housing.
And we also know that this growth of the unhoused population is directly related to increases in rents and housing prices. The data don’t show much relief coming on that front, as housing prices remain out of reach for too many Americans. Emily Peck at Axios writes that “The rate on the 30-year mortgage is hovering close to 7%, a nearly 6-month high,” adding that “Higher rates are putting home buying out of reach for many Americans and simply turning others off from the market. Though home sales picked up in the third quarter, even with rising rates, they’re still hovering at historic lows.”
The mortgage rate and rents are directly correlated to the rising rate of homelessness, but rising inequality is also a major contributor to the problem. The total wealth of all American billionaires more than doubled between 2015 and 2014, from $6 trillion to $14 trillion. The wealthiest ten percent now own 60% of America’s wealth, while the poorest 50% of the population only possesses 6% of the wealth.
For Americans on the lower end of the income scale, this huge and growing inequality means that poverty and homelessness are always looming as possibilities that are just a paycheck or two away.
This week, Veronica Nilsson at the World Economic Forum published a report showing the toll that inequality is taking on the world, and looking at potential solutions. “It is often claimed that wage increases depend on higher productivity — but OECD statistics show that wage rises have lagged behind mounting productivity for decades,” Nilsson finds. “While labour productivity increased by roughly 28% over the last two decades, real median wages across the OECD only increased by 8%, with the difference going to profits and top wage earners.”
Nilsson finds that contrary to neoliberal claims that growth for the wealthy few will trickle down to everyone else, “growth alone does not necessarily improve living standards. Instead, measures such as redistribution and better working conditions are also essential.”
She proposes two main levers to turn the tide of this global trend toward wealth inequality. “Effective taxation of the personal wealth of the very rich needs to be improved through ending tax avoidance, as does corporate taxation through the introduction of a global minimum tax rate,” Nillson writes.
Second, “Wage increases need to keep pace with increases in productivity. The balance of bargaining power between trade unions and employers has tilted far too far in favour of the latter, and needs rebalancing,” Nilsson explains. “Trade union density and collective bargaining coverage has shrunk by a fourth on average across OECD countries, from 45% in 1985 to 32% in 2017.”
It’s interesting to read Nilsson’s report and realize that growing inequality isn’t a uniquely American problem — it’s happening all over the world, even though the actual percentages differ from nation to nation. When we can take a step back and realize that we Americans don’t live in a vacuum, it becomes helpful to see how other countries and regions are perceiving these problems and acting on solutions.
There are of course any number of policies that could be enacted to reduce inequality between the haves and have nots, but Nilsson has correctly identified the two most important policy directions: The exorbitant wealth that’s being hoarded by the tippy-top of the wealth scale must circulate through the economy again, and the majority of worker paychecks need to grow significantly. That’s just as true in London and Paris and Melbourne as it is in Nashville.
Hiring Hits Record Lows
A number of economic thinkers are ringing alarm bells at some labor market numbers that came in last month. Heather Long wrote on Bluesky, “The hiring rate was anemic at the end of 2024. November’s hiring rate of 3.3% was the lowest since the early 2010s. We need hiring to pick up in 2025. This is not a healthy labor market dynamic to have such weak hiring.”
It’s important to note that the hiring rate doesn’t identify the number of Americans who are employed in total — rather, it measures the number of new hires per thousand Americans. Labor economist Aaron Sojourner digs a little deeper into this metric, pointing out that hires per capita are at the lowest numbers for workers aged 16 through 54 that we’ve ever seen since 2001, when this data was first collected. Americans aged 55 through 64 are near record lows.
You can find some fascinating data points when you drill down into the hiring numbers. For one thing, this hiring freeze doesn’t seem to be affecting races differently — the anemic hiring rates apply more or less equally to white, Black, and Latino Americans looking for work. And interestingly, hiring for workers with a high school level of education isn’t quite as low as their college-educated peers. Sojourner notes that “Folks with more education [than a high school diploma] are being hired at lower rates than ever before back to 2001.”
It’s telling, too, that aside from a huge burst of hires after the first wave of pandemic shutdowns that temporarily improved outcomes for workers aged 25 to 64, American hiring numbers never fully recovered to the higher levels from before the Great Recession of 2008.
We should beware of catastrophizing about the immediate future of the job market. These poor hiring numbers don’t necessarily predict that we’re about to see the unemployment rate plummet, or a big wave of layoffs. And we only have two dozen years’ worth of this information to assess, which is a fairly small dataset.
Plus, once they do get hired American workers are currently experiencing record-high rates of job security. Sojourner is quick to note that “In 2 decades of data pre-pandemic, the lowest share of employees fired in a month was 1.1%, which happened in just 4% of months.” But he adds that “Since Jan 2021, the share has been at or below 1.1% in 96% of months.”
Still, the frustration that American workers are feeling is palpable. This month, a Texas employer that owns multiple Applebee’s and Peter Piper Pizza locations went viral when an employee leaked an email informing workers that “we regret to inform you that we are cancelling the hourly vacation plan effective today. We understand the importance of vacation benefits for our employees,” the email explained, “but we need to also remain competitive in our industry.”
The response to this leaked email was so vicious that the employer sent out an email one day later that completely reversed course: “We have heard you all loud and clear through your emails, social media presence, and contact with your managers and general managers about cancelling the hourly vacation plan,” the email read. “We truly do care about all of our employees, and we have heard your concerns. Therefore, we are reinstating the hourly vacation plan effective immediately.”
Let’s be clear that social media outrage is not a sustainable or reliable replacement for strong worker protections written into law and the representation of a good union. For every one success story like this one, there are likely dozens of bad-faith employers like Waffle House that are allegedly committing nearly $50 million in wage theft every year. But the fact that thousands of Texans were eager to fight for the vacation benefits of restaurant workers is a sign that Americans are increasingly fed up with the growing power imbalance between workers and their employers.
Mixed Signals in Consumer Spending
“Holiday sales from the beginning of November through Christmas Eve climbed 3.8%, outpacing the 3.1% increase from a year earlier, according to Mastercard SpendingPulse,” reports PBS. That’s more than half a percentage point higher than Mastercard’s predictions for the holiday season. The National Retail Federation estimates that Americans spent just shy of a trillion dollars between November and December.
These numbers seem to fly in the face of the narrative that Americans are still feeling the sting of higher prices. The data seemed to back up that rosier assertion: immediately following the election, American consumer confidence surged into positive territory for the first time since inflation started to take hold in 2021.
But that confidence seems to have been short-lived. “American consumers are not feeling the holiday cheer: concerns about what’s ahead for the economy shot up as tariffs loom, according to a barometer of consumer confidence,” reported Courtenay Brown in Axios.
The Conference Board, a think-tank that has measured American consumer sentiment for over a century, explained in a press release that their consumer confidence index “declined by 8.1 points in December to 104.7. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — fell 1.2 points to 140.2.” Most worryingly, “The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — tumbled 12.6 points to 81.1, just above the threshold of 80 that usually signals a recession ahead.”
Again, we have to acknowledge that economic data has been weird ever since the pandemic, and self-reported data is especially unreliable in this age of division around partisan politics. If you listen to what the American people say, they’re incredibly worried about prices and the economic future of the country. But if you pay attention to their spending habits, the American people seem to indicate that they’re feeling economically secure and not particularly bothered by higher prices.
We’re living in a period of intense speculation as we wait for the new administration to be sworn into office and enact their policy agenda. If you look over this issue of The Pitch in total, it seems as though Trump is inheriting an economy that has some powerful strengths and some glaring and growing weaknesses, along with multiple contradictions in how people feel about the economy and behave as workers and consumers.
This Week in Trickle-Down
The newly installed Republican Congressional majority is considering two different paths forward for the Trump Administration’s policy agenda: House Republicans and Trump seem to want to pass a single large bill that would make good on Trump’s promise of “mass deportation of unauthorized immigrants, a border security crackdown, new defense spending and extending his multi-trillion-dollar 2017 tax cuts’ which benefitted the wealthy and big corporations, while the Washington Post reports that “Senate leaders want to split Trump’s agenda into two measures, with legislation focused on national security and energy production slated for a quick vote to chalk up an early win before a more complicated second move on taxes and spending.”
This Week in Middle-Out
- “In a major change that could affect millions of Americans’ credit scores, the Consumer Financial Protection Bureau on Tuesday finalized a rule to remove medical debt from consumer credit reports,” writes ABC News. “The rule would erase an estimated $49 billion in unpaid medical bills from the credit reports of roughly 15 million Americans,” which “could help boost those borrowers’ credit scores by an average of 20 points, helping them qualify for mortgages and other loans.”
- “Port terminal operators and the longshoreman’s union reached a tentative deal on Wednesday that averts a port strike that would have shut down the major East and Gulf Coast ports next week,” reports the Washington Post. “The deal must still be voted on by union members but offers workers new protections against automated technology replacing jobs.”
- “Today President Biden will take action to protect the entire U.S. East coast, the eastern Gulf of Mexico, the Pacific off the coasts of Washington, Oregon, and California, and additional portions of the Northern Bering Sea in Alaska from future oil and natural gas leasing,” the White House wrote earlier this week. This action will cover some 625 million acres of land and water, which is the single largest act of environmental conservation in presidential history.
This Week on the Pitchfork Economics Podcast
Nick and Goldy are busy making new episodes for you to enjoy this year, but we’re starting out the new year with a revisitation of one of our liveliest conversations: A chat with political economist and author Mark Blyth about why trickle-down economics refuses to die, even though its core principles have been debunked and discredited.
Closing Thoughts
No doubt you saw the headlines about the abrupt bankruptcy filing of the retail chain Party City. Roughly 12,000 workers at some 700 stores in 44 states around the country learned in the heat of the holiday shopping season that they were about to be laid off and the leases of their stores would be auctioned off in a fire sale. Many of those workers learned about the impending layoffs from headlines shared on social media, rather than hearing it directly from their employers.
When the news broke two weeks ago, the Party City closures were framed as another natural step in the ongoing decline of brick-and-mortar retail stores. “2024 has been a rough year for U.S. retailers,” reported CBS News at the time. “There were more than 7,100 store closures through the end of November 2024, a 69% jump from the same time last year.”
But if you’re experiencing deja vu, you’re not alone. We saw the same claims repeated by the media when 800 Toys R Us stores around the country shuttered, or when Red Lobster fell into financial distress. We were told that shrimp was too expensive to serve in mass quantities, and that online shopping was killing the toy business. And it is true that Americans’ spending habits are changing.
But in fact, both Toys R Us and Red Lobster both had a perfectly stable profit model, and it turns out that private equity firms had sucked the profit out of both chains, extracting value and leveraging it into the wallets of wealthy businessmen while laying off workers and leaving huge empty storefronts behind in communities around the country. Private
And that’s what’s happening with Party City, too. You have to read more than halfway down this Yahoo News article about the chain’s closure before you see where the money went: “Party City’s largest owners include Capital Group, investment firm Davidson Kempner and Silver Point Capital, according to court papers.”
I don’t have a balance sheet of Party City’s finances in front of me, but you can be pretty sure that the retailer’s 12,000 planned layoffs didn’t extend to the offices of the hedge funds and private equity firms that bought into Party City after its first bankruptcy hearing a few years ago.
It needs to be said again: This is not the way it has always been in America. It hasn’t always been legal for private equity and hedge fund firms to loot companies, lay off thousands of workers, and then move on to the next victim. This is the result of four decades of trickle-down policy decisions that began in the 1980s.
To be clear, companies have always gone bankrupt and laid off workers throughout American history. But it wasn’t until the deregulation of the financial industry that companies could specialize in profiting off that process, intentionally pumping the troubled companies full of debt before they collapse and selling the leavings for scrap. This is the intended result of trickle-down economics — it’s the thing that elected leaders wanted to happen, and they shaped the laws to create this reality for American workers and consumers.
The important thing to remember is that if trickle-downers chan shape the law to create these kinds of intolerable conditions, we can also use middle-out economics to make this kind of harmful economic behavior illegal again. These race-to-the-bottom conditions aren’t inevitable, or a natural end result of capitalism: They’re policy choices made by people.
And other people, like Senator Elizabeth Warren, have written policies that would stop the sacking of companies like Party City. This is a policy choice that would work out better for all Americans, and it’s just as possible as the trickle-down option that’s proven to only be beneficial for a wealthy few.
So the question is up to you, and to all Americans: What kind of economy do you want to live in? An extractive winner-take-all economy, or an economy that grows from the middle out? I know which economy I prefer, and I promise you that it is possible.
Onward and upward,
Zach
New Year, New Wage was originally published in Civic Skunk Works on Medium, where people are continuing the conversation by highlighting and responding to this story.