The U.S. economy in 2024 is doing better than the usual growth rate of around 2.0%. In the fourth quarter, the gross domestic product (GDP) grew at an annual rate of 2.3%, which is slightly lower than expected and down from 3.1% in the previous quarter.
A big part of this growth comes from consumer spending. It surged by 4.2% in the last quarter, only second to the buying spree seen in 2021, largely due to pandemic relief checks. Though many thought consumers might slow down, they continue to show strong confidence in the job market and are making purchases ahead of time, anticipating that prices might rise due to tariffs.
However, business investment took a hit, falling for the first time in over three years. Companies seem cautious, fearing that increased prices from tariffs might hurt future sales. Some businesses are rushing to buy supplies now, worried that 10% tariffs on Chinese goods could push prices even higher.
China responded with its own tariffs of 10-15% and launched an investigation into Google, aiming at companies that hold a significant share in the U.S. stock market. Analysts predict that these tariffs could raise inflation in the U.S. by 0.6%. It may sound small, but given the current economy, consumers are feeling the pinch—just look at the price of a dozen eggs hitting $7!
The U.S. government aims to use these tariffs to tackle issues like fentanyl trafficking and unfair trade practices. For those unsure why tariffs lead to higher prices, it’s about the cycle of retaliation; when one country imposes a tariff, others usually follow suit, raising import costs for everyone.
The U.S. continues to be the largest buyer in the world, which means that increased import prices deeply affect consumer spending, making up about two-thirds of our economy. Inflation recently climbed a bit, with the Consumer Price Index (CPI) rising by 0.4% between November and December. Year over year, prices were up 2.9% in December, compared to 2.7% in November.
Many people are frustrated with rising prices since 2020, especially since the word “core” inflation often excludes essentials like food and energy. In December, core inflation fell slightly from 3.3% to 3.2%, but many wonder who lives without buying food or paying for energy.
Interest Rates
At the latest Federal Reserve meeting, interest rates remained steady. As long as the job market stays strong and inflation persists, the Fed is likely to be cautious. Most predict that rates might drop twice this year, in September and December. High rates are affecting the housing market, with 2024 home sales about 20% lower than the norm, and the least reported since 1995.
Along with high rates, a lack of available homes is keeping prices high. About 4 million homes were sold last year, while a healthy market sees 5.5 to 6 million sales.
Consumer Sentiment
Labor Market
Recent labor data showed some easing in job demand, yet hiring remains steady and layoffs are low. The unemployment rate dropped to 3.8% in December from 4% in November, although Colorado and El Paso County saw higher rates at 4.5% and 4.6%, respectively. More people are entering the job market in Colorado, but we face challenges with an aging workforce and fewer newcomers due to high living costs.
It’s important to note that labor statistics in Colorado are currently questionable due to data collection issues. The Bureau of Labor Statistics will withhold the state’s data until it can guarantee accuracy.
In Colorado Springs, job openings fell from 17,266 in November to 16,055 in December, while the number of people unemployed decreased slightly. This change led to more competition for available jobs, which could explain higher local unemployment rates despite some inaccuracies in data.
Fortunately, various workforce development initiatives are in place to help address these issues. A recent $5.75 million Department of Labor grant aims to boost career pathways in advanced manufacturing, in collaboration with local colleges and organizations, indicating a positive outlook for future job growth.
Housing Market
The Pikes Peak region’s housing market saw a cooling trend in December, with home sales dipping slightly. However, new construction activity is up, with 183 single-family permits issued, compared to 162 in November. Multifamily housing permits also surged, with 276 units approved in December against just 55 the month prior, despite a current 12.7% apartment vacancy rate.
Overall, 2024 showed permits for 3,852 units, still far from the estimated healthy construction level of 8,500 units annually. This ongoing gap between housing demand and supply continues to be a challenge in the region.
