Crypto News: Global inflation peaks

Hello. Today we look at how global inflation may have hit its high, the upcoming US jobs report, and examine what demographic changes show about the labor market.

It's taken longer than most central bankers and economists thought, but global inflation may just have peaked.

Data in the US and euro area this week pointed to a weakening of price pressures, as do indicators from factory gates and Wall Street.

Supply chains appear to be unlocking and the prices of food and fuel have fallen, while obviously central banks have driven up interest rates.

The result is that Bloomberg Economics estimates worldwide inflation topped out at 9.8% year-on-year in the third quarter and is now headed to 9.5% in the final three months of the year and 5.3% at the end of 2023.

Of course, it could be a false dawn. A reopening of China could spur demand and commodity costs, while workers could push up wages.

Even if the peak has been reached, it's too soon to declare victory.

For policymakers, the recent high "doesn't mean the worst is over," said Tom Orlik, Bloomberg's chief economist. "Even as they edge down, consumer price readings will remain way above the comfort zone for central banks, necessitating further tightening even as recession risks loom."

See more charts on the sources of inflation here.

—Simon Kennedy

Got tips or feedback? Email us at ecodaily@bloomberg.net

Friday's US employment report will fall far short of the turning point Federal Reserve officials are seeking in their battle to beat back inflation, if forecasters ahead of the release are anywhere near accurate, Reade Pickert reports here.

The 200,000 gain in payrolls seen in the Bloomberg survey would mark the weakest monthly increase since the end of 2020. But that's still faster than the economy's longer-run trend.

There were 1.7 job openings for every unemployed worker in the latest data — a historically elevated figure, and a ratio that Fed Chair Jerome Powell highlighted on Wednesday.

So an even bigger slowdown is needed to contain the wage growth that's helped fuel inflation. There were potential signs of that in data Thursday on the US manufacturing sector, which also showed the first contraction in overall industrial activity since the Covid shock in the spring of 2020.

Also key to watch will be the average hourly earnings figures for December, with economists seeing a dip to a 0.3% monthly gain.

Sri Lanka's fall | Not long ago, the island nation was an economic success story. With stunning swiftness, it's become a cautionary tale of corruption and financial fragility.
China's politburo | China's top leaders will likely signal a more pragmatic approach toward Covid controls at a key upcoming meeting while putting more focus on boosting economic growth.
Last resort | Banks are increasingly turning for funding to the Fed's discount window, a resource that's usually viewed as a last resort.
Fed's man in Chicago | The Chicago Fed named Austan Goolsbee, a former adviser to President Barack Obama, as its incoming president. He'll be a voter on rates in 2023.
South Africa scandal | A crisis engulfing Cyril Ramaphosa threatens to take down more than just the president. Hanging in the balance is the government's reform agenda to kick-started a stagnating economy.

Further research is backing the idea that demographic changes explain a lot more about shifts in US labor than previously understood.

A new study from the Federal Reserve Bank of Boston suggests demographics are having an even stronger effect in pulling down the trend jobless rate.

With the aging of the US population, younger people nowadays make up a smaller portion of the workforce. That tends to push unemployment down, because they tend to have higher jobless rates, as they look for work and switch from one thing to another early in their careers.

But the impact doesn't stop there. The new paper by economists Bruce Fallick and Christopher Foote, shows "there is evidence of indirect effects of the age structure that amplify its direct effects." In other words, when the share of the overall labor force made up by young people drops, that can affect unemployment levels for other age groups as well.

The study, drawing on state-level data previously unavailable for research, doesn't conclude why this is the case. Other literature suggests, among other things, that shifts in age groups might affect employers' investment and recruiting patterns.