Explaining inflation, jobs data and holiday spending predictions

United States--

Jobs:

The U.S. added 64,000 jobs in November, which was higher than what economists predicted, but a decline from September's 119,000. September is the most recent month with complete data.

In November, the unemployment rate went up to 4.6 percent from 4.4 percent in September, according to the Bureau of Labor Statistics.

Retail Sales:

Sales at retailers and restaurants did not change in October from September.

Inflation:

Government data shows inflation fell in November, lower than what economists expected. Consumer prices went up 2.7 percent compared to 3 percent year-over-year inflation in September.

ABC57’s Jordan Tolbert spoke to John Talbott, Senior Lecturer of Marketing at the Kelley School of Business at Indiana University in Bloomington.

“I think there's room for skepticism around the inflation number. A lot of people, economists, are looking at it. The methodology behind the November number was a bit different, it didn't include part of the month. There were different components of it that were not the same,” said Talbott. “If anything, I think the majority of people would say that inflation is understated relative to what consumers are feeling.”

Talbott says the inflation has a disproportionate effect on lower-income households, requiring people to spend more of their dollars on fundamental things—like food, housing, and clothing.

“Other households, probably less than 1% of the households, are in really good shape, probably, from a wealth standpoint, maybe not all of them, but relatively speaking. I think the majority of households are anxious a bit and there has been so much volatility,” said Talbott.

He mentioned the tariffs going into effect and the stock market impacts in March.

“Since that time period, I think the tariff issue has been diluted a bit. And it's not sort of the top of the news, but it is top of mind. I think people perceive that prices are higher, and perception matters. I mean, if they perceive it, it doesn't necessarily have to be true,” said Talbott.

He says the average American consumer is being careful.

The National Retail Federation predicts retail sales between November and December will grow between 3.7 and 4.2 percent over 2024, with holiday sales to surpass $1 trillion for the first time this year.

“A year ago, we probably had a Christmas season that had about a 4.2, 4.3 percent increase, which is about in line with what the National Retail Federation usually predicts. And so, this year, I think we're looking at coming in at about a 3.7% increase. So that's off historical norms and it's also a situation where the dollar spends maybe more, but if you look at units per transaction, it's actually down. And so what's driving the number up is the increased prices that consumers are seeing at the point of sale,” said Talbott.

Talbott says overall spending is in a good spot— but a majority of households are being exceptionally cautious, shopping for deals, and keeping price increases on various items in mind.

“The season seems to be going pretty well. I think it's a bifurcated spending environment, meaning that I think there's some households that are really driving the average dollar spend per household relative to others. So if you think of a mean or an average, it can be kind of skewed, depending if there's a few very large numbers and quite a large, a big number of relatively small numbers,” said Talbott.

He says it's important that shoppers be cautious of their spending.

“I always worry about people running up giant credit card bills and ending up with a huge January hangover. Remember that being around friends and family and the opportunity to interact is really, I think, the great gift of the holidays, and a single purchase item is much less important than any of that,” said Talbott.