Inflation data to show whether prices continued cooldown

September 11, 2024

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(NEW YORK) — A fresh inflation report on Wednesday will show whether price increases have continued a monthslong cooldown as they fall toward normal levels.

Economists expect prices to have increased 2.6% over the year ending in August. That figure would mark a notable slowdown from the year-over-year rate of 2.9% recorded in the previous month.

After six consecutive months of slowing price increases, inflation stands at its lowest level since March 2021. However, inflation remains nearly a percentage point higher than the Federal Reserve’s target rate of 2%.

The new price data on Wednesday holds major implications for the course of widely expected interest rate cuts.

The chances of an interest rate cut at the Fed’s meeting next week are all but certain, according to the CME FedWatch Tool, a measure of market sentiment. Market observers are divided over whether the Fed will impose its typical cut of a quarter of a percentage point, or opt for a larger half-point cut.

So far this year, the job market has slowed alongside cooling inflation. That trend was underscored last week by a weaker-than-expected jobs report, though employers added a solid 142,000 jobs. The unemployment rate has ticked up this year from 3.7% to 4.2%.

The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In theory, low interest rates help stimulate economic activity and boost employment, while high interest rates slow economic performance and ease inflation.

Recent trends have shifted the Fed’s focus away from controlling inflation and toward ensuring a healthy job market.

Speaking at an annual gathering in Jackson Hole, Wyoming last month, Fed Chair Jerome Powell said the “time has come” for the Fed to adjust its interest rate policy.

At previous meetings, Powell said the Fed needed to be confident that inflation had begun moving sustainably downward to its target rate of 2% before instituting rate cuts. Last month, Powell appeared to indicate that the Fed had achieved that objective.

“My confidence has grown that inflation is on a sustainable path down to 2%,” Powell said.

Since last year, the Federal Reserve has held interest rates at their highest level in more than two decades. High borrowing costs for everything from mortgages to credit card loans have helped slow the economy and lower inflation, but the policy risks tipping the U.S. into a recession.

Last month, Goldman Sachs economists raised the probability of a U.S. recession in the next year from 15% to 25%. However, economists disagree about whether current economic conditions warrant serious concern.

What to know about the hoax ‘Goodbye Meta AI’ posts going viral on Instagram

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(NEW YORK) — If you’ve opened Instagram over the last few days, you’ve likely seen a post that begins with the words “Goodbye Meta AI.”

The post, most often shared on Instagram stories, features black-and-white text warning of “legal consequences” and the use of artificial intelligence by Meta, the parent company of Instagram, Threads and Facebook.

“If you do not post at least once it will be assumed you are okay with them using your information and photos,” the text reads, in part. “I do not give Meta or anyone else permission to use any of my personal data, profile information or photos.”

Since early September, the message has been shared widely, even though it is a hoax.

More recently, when the message is shared on Instagram stories, it is blocked out by a warning that the message contains “false information.”

The warning directs users to a fact-check on the website LeadStories.com.

“Does posting a statement ensure that users of Meta services will not have their data used in Meta’s artificial intelligence training? No, that’s not true: Posting the viral statement, or any other statement, doesn’t mean that Meta will not use that data for AI training, but users in Europe can object via a form in their account settings,” the fact-check reads. “The statement is an example of “copypasta,” text containing information that’s often not true but which is repeatedly copied and pasted online.”

Meta describes generative AI as, “a type of artificial intelligence that can create new content when a person or business gives it instructions or asks it a question.”

When Meta announced its new generative AI features last year, the company detailed how and why it uses data for AI purposes.

According to the company, it pulls data for AI from users’ public posts, their interactions with AI features and publicly-available information from places like databases and search engines.

“We use public posts and comments on Facebook and Instagram to train generative AI models for these features and for the open-source community,” reads Meta’s public privacy policy. “We don’t use posts or comments with an audience other than Public for these purposes.”

The company does not appear to pull information from data for generative AI from user accounts that are set to private.

Meta did not reply to ABC News’ request for comment.

How a Canadian rail shutdown could worsen US inflation

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(NEW YORK) — Two major Canadian freight rail companies locked out thousands of workers on Thursday, shutting down cross-border shipping routes and risking serious damage for the U.S. economy, industry experts told ABC News.

The rail lines carry everything from chemical inputs to auto parts, holding the potential to cause shortages for a range of products American consumers and businesses depend on. While the damage is minimal so far, a prolonged shutdown of weeks or months could slow U.S. economic growth, rekindle inflation and put some workers out of a job, the experts said.

“Right now, I do not think the sky is falling,” Joseph Schofer, a professor emeritus of civil and environmental engineering at Northwestern University, told ABC News. “In a week or two, effects will begin to develop.”

The shutdown will cost the Canadian economy about $250 million per day, according to Brendan La Cerdaa, director of economic research at Moody’s Analytics. If the strike continues for a week or two, the U.S. economy could start suffering costs of about $70 million per day, La Cerda said.

More than 9,000 Teamsters workers are off their jobs after Canadian National Railway Co. (CN) and Canadian Pacific Kansas City Ltd. (CPKC) locked them out when they failed to reach a deal on a new contract. It’s the first time both railways have been simultaneously halted.

“Throughout this process, CN and CPKC have shown themselves willing to compromise rail safety and tear families apart to earn an extra buck. The railroads don’t care about farmers, small businesses, supply chains, or their own employees. Their sole focus is boosting their bottom line, even if it means jeopardizing the entire economy,” Teamsters Canada Rail Conference President Paul Boucher said in a statement on Thursday.

In a statement, CN said it had negotiated with workers in good faith for nine months, offering better wages and shorter hours.

“Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout,” the company said on Thursday.

Similarly, CPKC said the lockout came about after months of unsuccessful negotiations.

“We fully understand and appreciate what this work stoppage means for Canadians and our economy. CPKC is acting to protect Canada’s supply chains, and all stakeholders, from further uncertainty and the more widespread disruption that would be created should this dispute drag out further resulting in a potential work stoppage occurring during the fall peak shipping period,” the statement said.

What does the Canadian rail shutdown mean for the U.S. economy?

A brief shutdown of the top two Canadian freight rail companies would not meaningfully impact the U.S. economy, experts told ABC News. However, they added, a prolonged lockout would damage the nation’s economic performance and risk accelerating inflation.

Many companies rely on Canadian rail lines to deliver raw goods that play a vital role in the supply chain. Affected industries include auto companies, chipmakers and fertilizer manufacturers, experts said. Perishable goods also reach U.S. consumers on trains from Canada.

As a smaller-scale version of the supply blockage incurred during the COVID-19 pandemic, a Canadian freight rail shutdown could hinder economic activity of businesses that import raw materials, rising prices for consumers who encounter shortages for some products.

“The producers will probably absorb some of those price increases in the short term, but eventually they could get passed on to consumers,” Kyle Handley, a professor of economics at the University of California, San Diego, told ABC News.

Over the coming weeks, a shutdown could slow gross domestic product growth and cause layoffs at directly impacted firms, such as auto factories, Jeff Macher, a professor of strategy and economics at Georgetown University’s Center for Business and Public Policy, told ABC News.

“A prolonged stoppage could lead to a certain amount of job losses,” Macher said.

The potential supply disruption could arrive at a vulnerable period for the U.S. economy. Growth is cooling but remains solid. Price increases have slowed dramatically but remain higher than the Federal Reserve’s target level.

For now, questions remain over the duration and scale of the U.S. economic fallout, experts said.

“If the stoppage ends within a week or so, it’ll have no effect on U.S. GDP,” Macher said. “If it extends beyond that, then it could bleed into and impact the U.S.”

ABC News’ Aaron Katersky and Zunaira Zaki contributed reporting.

Unemployment is low but rising quickly. Is it reason to worry?

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(NEW YORK) — Inflation bedeviled the U.S. economy for years, but a cooldown in price increases has shifted concern toward a different foe: Unemployment.

Hiring remains solid but has slowed dramatically from a peak achieved during the nation’s rebound from the pandemic. The unemployment rate still hovers near historic lows but has climbed markedly this year.

A jumbo-sized interest rate cut at the Federal Reserve last week was viewed by some economists as an effort to fend off rising joblessness, even as Fed Chair Jerome Powell offered up reassurance.

“The U.S. economy is in good shape,” Powell said.

Mixed signals sent by the nation’s labor market pose a high-stakes question for tens of millions of jobholders as well as millions of people seeking work: Where are conditions headed from here?

Economists who spoke to ABC News disagreed sharply about the outlook.

Some acknowledged a slowdown in recent months but dismissed worries about its implications, pointing to resilient job growth and other healthy metrics that suggest the economy continues to hum. Others, however, emphasized their concerns about the trajectory of labor conditions and what it indicates about potential layoffs.

“The job market is cooling but it has not frozen up,” Mark Hamrick, senior economic analyst at Bankrate, told ABC News. “This is a situation that’s seen as relatively stable but results may vary.”

Economists widely acknowledge that the labor market has slowed. That trend doesn’t come as a surprise after a years-long period of high interest rates, which typically weigh on economic activity and company hiring, some economists told ABC News.

In 2022, the pandemic rebound triggered a blazing-hot job market that saw employers add an average of nearly 400,000 jobs per month. Over a three-month period ending in August, employers added an average of about 116,000 jobs per month.

The unemployment rate has climbed this year from 3.7% to 4.2%, though it remains relatively low by historical standards.

The sky-high job growth was bound to slow, in part because the economy lacked room for expansion after employers had hired the workers they needed and a dwindling number of unemployed people remained on the sidelines, according to Valerie Wilson, a labor economist who runs the program on race, ethnicity and the economy at the left-leaning Economic Policy Institute.

“We expected job growth at some point to slow down,” Wilson said. “To me, that alone isn’t cause for concern.”

The uptick in unemployment isn’t cause for concern yet either, Wilson said, highlighting data that demonstrate strength in the labor market and across the wider economy.

The share of job holders between the ages of 25 to 54 — known as the “prime age” for workers — stands at a 23-year high. U.S. gross domestic product grew at a solid pace over three months ending in June, U.S. Bureau of Economic Analysis data showed. A relatively low number of people has claimed unemployment benefits in recent weeks, suggesting few layoffs.

“I don’t think there’s an immediate cause for concern,” Wilson said.

Some economists disagreed. They pointed to a recession indicator known as the “Sahm Rule,” which says that a rise of 0.5 percentage points in the unemployment rate within a 12-month period typically precedes a recession.

“When it comes to the Sahm Rule, what you see in the data is when the unemployment rate starts rising, it usually has a lot of momentum and takes a while to stop,” Nick Bunker, economic research director for North America at Indeed Hiring Lab, told ABC News. “That’s the concern.”

The rule’s originator, former Fed economist Claudia Sahm, has questioned whether it applies in this case, in part because unemployment remains low.

Economists who are worried also pointed to data suggesting that the employment situation may not be as strong as some contend.

Despite low unemployment, more than 10% of Americans can’t find enough work, meaning for instance that they are working part-time but want full-time jobs or have fallen out of the labor force because they’ve stopped looking for work, Julia Pollak, chief economist at ZipRecruiter, told ABC News.

“Rising unemployment is not just a blip,” Pollak said.

The exact path forward for the job market is difficult to predict, some economists said. Last week’s interest rate cut could help jumpstart economic activity, some noted; while others said such policy typically takes effect on a lag that will render it irrelevant in the near term.

“The future is uncertain,” Bunker said. “I wouldn’t say we’re moving in this great direction where everything will be completely fine. But I wouldn’t fall into the trap of saying there’s a rising unemployment rate so we’re certain to be in a recession soon.”