If there is a positive aspect to the interminable period between the election and the inauguration of a new president, it is that it affords one the opportunity to reflect on the previous year. So rather than distract myself with either online shopping or ruminations of what the New Year will bring, I am instead trying to sharpen my hindsight on what has happened during the past twelve months.
Here are my major economic takeaways from 2024, or at least, here are the trends I think I can see with sufficient clarity at this time.
Barring an unforeseen catastrophe, the U.S. economy will enter 2025 with solid momentum. One of the major themes with regard to the prevailing trends in the macroeconomic indicators in 2024 is that they have consistently overperformed expectations, and it looks like they will continue to do so through the fourth quarter.
The two most publicized vital signs pertaining to the health of the economy — the stock market and the labor market — have never looked better. The stock market is trading at or near all-time highs. Of the major stock indices, the Dow Jones Industrial Index is the laggard with a gain of only 16 percent so far this year. The Russell 2000 Index is up a tidy 21 percent while the S&P 500 Index and the Nasdaq 100 Index are both up a sparkling 25 percent for the year.
It is clear the stock market approves of the election outcome. And while there is still time for a crash in 2024, it would take something disastrous to wipe out gains of this magnitude. I cannot remember anybody forecasting gains this large at the beginning of 2024, but I can clearly remember forecasts calling for the market to be flat or even down for the year.
The number of people employed is also at an all-time high, and the unemployment rate is holding steady at just above 4 percent. The pressure in the labor market is gradually dissipating as 2024 comes to an end. However, there are still sectors of the economy dealing with acute labor shortages. Here again, I cannot remember anybody forecasting a labor market this robust for 2024.
Another takeaway from this year is the stickiness of price pressures in the services sector. The overall trend in the total Consumer Price Index (CPI) this year has been downward, but it has still not decreased to the Fed's target level of 2 percent. It has recently leveled off in a range between 2.5 percent and 3 percent. This is tantalizingly close to the target, but not quite there.
The reason the overall CPI has not yet hit the target and stuck is entirely due to the price trend in the services sector. The price trend in the goods sector has been below 2 percent for several months. So, the goods producing sector has not had the ability to raise prices in 2024, but the services sector — particularly the insurance and shelter (or rents) segments — is still recording price increases.
I do not see the current price trends for either goods or services ending abruptly in the near future, though there is the possibility that the equilibrium will shift at some point in 2025. Consumers are certainly feeling the effects of the price increases. This was the major factor in the presidential election for many voters. But for now, it is just too early to determine what it will take to get the trend in overall prices down to 2 percent for a sustained period.
All of these trends in the macro data are interesting, but ultimately we want to figure out what they mean for the manufacturing sector, and particularly the plastics industry. This brings me to my final takeaway from this year.