The US government is back to work, at least until the end of January. So, we have been 44 days without government data, with the most pressing being jobs data and inflation.
We did get the inflation numbers so that Social Security could update the COLA amount for 2026. And just for the record, Social Security will go up for 2026 by 2.8%.
Speaking of inflation, there is some question about whether we will be in a 70’s type inflation regime or not. My opinion is that we likely won’t be in that environment (at least to the magnitude of the 70’s). But I think it’s likely that we will be in some kind of “boomerang” that sees the inflation rate go higher, then come back down, then go higher again. I saw this chart over the weekend that I thought was interesting.
Here is a chart of interest rates in the last inflationary period.
Here’s how it looks compared to today’s period.
Will we see this third wave? Nobody knows, but my guess is we will see a similar third wave after the slowdown in the economy passes and the government stimulates more. More money = more inflation.
With regard to the slowing economy, here is a chart on layoffs, from ‘Challenger, Gray, and Christmas.’ The most layoffs since COVID, but the better comparison is to 2009. Keep in mind that the 2020 layoffs were from shutting down the economy – a rather unique situation, to say the least.
Now that the government is open, we should start seeing economic data coming out. It remains to be seen when the first bits of data will appear, but in the next couple weeks is when we expect that to start.
That’s it for this week. Please let us know if you have any questions or comments about this or any other topic. We will be happy to have a conversation. In case we don’t publish next week, please let this be your Thanksgiving greetings from all of us here at MPCA. Our gratitude for each of you runs deep!