A trio of economic barometers suggest smooth sailing ahead

By Joe Higgins, Quest for Quality

  • The economy added 517,000 jobs in January as unemployment remained at 3.4%, a 50-year low.
  • Retail sales were up 4.5% at furniture stores and 3.5% at appliance and electronic stores.
  • The Consumer Price Index rose 0.5% from December, indicating that inflation will be with us throughout the year.

I waited 15 days for three important January reports before writing this column: the Consumer Price Index (CPI), the unemployment numbers and retail sales. Given the unpredictable nature of our economy today, I figured that combining these three reports into one YSN update would prove more productive and informative. 

So let’s start with the CPI.


The January CPI was released mid-February and disappointed the stock market, consumers and investors. It rose 0.5% from December, marking the first month-over-month increase in half a year. We knew inflation would be a long-term problem, but I, and most analysts, were convinced it was decelerating. Annualized growth was 6.4%, which was little changed from the month prior.

Banks and economists had anticipated a 0.5% month-over-month increase, but forecast 6.2% for the year-over-year figure. While prices have lowered substantially since June, some critical items like food are still up 10.1%, the report showed. 

The impact of inflation is very personal; consumers experience it differently depending on their lifestyles. For example, the inflation rate is significantly less for someone who works 3 miles from their office, compared to someone who drives 30 miles to work. The CPI report indicated that gasoline jumped 30 cents a gallon in January — not even close to its July 2022 high, but disturbing nonetheless to the average consumer. 

Here is another example of personal inflation levels: Housing accounts for almost 40% of the CPI’s core reading, up nearly 0.8% in December and 8.1% over the same period last year. If you own a home, the impact of this large percentage of CPI is negligible, but if you are buying or renting it, rising prices are a game changer. 

Many Americans thought inflation would fade out rapidly and end our pain, but this month’s report shows that high prices will be with us for most of 2023. Expectations are that the Federal Reserve will raise rates another 25 basis points at its next meeting, and then repeat that effort one more time in 2023. 


The most exciting news was that the economy added 517,000 jobs in January and surpassed the expectations of economists and Wall Street’s prediction of 188,000 new positions. After six months of slower job growth, this was a complete shock to all observers. Economists missed this number because they thought eight interest rate hikes since March of 2022 would finally slow the economy and job creation.

I can now make the case that this level of job creation could forestall a 2023 recession and that the Fed could achieve its so-called soft landing (raising rates and slowing the economy without causing a recession). The economy is so strong right now that it can and will sustain even more interest rate hikes for the rest of this year. The January jobs report may ultimately prove to be an anomaly, but if not, it’s good news for the first quarter.

The Fed has a long fight on its hands to get inflation under control. This level of job creation, combined with 4.1% wage growth, is inflationary in and of itself. So while the current numbers suggest that a recession is improbable at best and maybe even impossible, inflation will be hard to curtail. 

Retail Sales

If all this news didn’t make you smile, then listen to this little gem buried at the bottom of the Commerce Department’s January retail sales report: Sell-through at furniture stores were up almost 4.5%, and appliance and electronics store sales were up 3.5%. 

See: Furniture, Appliance Sales Rebounded in January

The top line of this report showed that total U.S. retail sales were up by the most significant margin of the past two years, indicating that consumers are still very active at retail — even in the face of the highest inflation levels in 40 years. Job creation and rising wages supported this retail growth, along with the 8.7% pay increase that 70 million Americans on Social Security received in January at a cost of $100 billion, much of which became disposable income. 

The Bottom Line

Please don’t underestimate the power of job creation; it is the engine that runs the ship, and has saved the economy this past year amid eight interest rate hikes.

Inflation will still be with us throughout 2023, but American consumers have not been intimidated by higher prices, as spending has increased over the past ten months.

The increase in retail sales surprised us, as the expectations were that rising rates would slow down shopping. But America remains the number one consumer market globally and we are not showing any signs of losing that status.

Joe Higgins is a 44-year veteran of GE and Whirlpool Corp. who brings his executive experience to bear as a business consultant, AVB keynoter and YSN contributor. Visit his website, Quest 4 Quality with Joe, at Q4QwithJoe.com.

Upcoming Events