Market Overview Analysis by Ed Yardeni covering: . Read Ed Yardeni's latest article on Investing.com
report compiled by the Bureau of Labor Statistics mostly included revised data for Q3-2024, which mostly supported this upbeat outlook.
Regarding fiscal policy, Trump 2.0’s impact on inflation is a “known unknown.” Tax cuts would also boost demand for goods and services. Tariffs would likely cause a one-time increase in the inflation rate unless they are offset by a stronger dollar. That’s almost a four-fold increase. However, at 1.9%, the rate is only back to slightly below its historical average of 2.1%—so far. As we’ve previously explained, we expect the current phase of the Digital Revolution to boost the trailing average of productivity growth we use to 3.5%, plus or minus 0.5%, by the end of the decade. This forecast might seem delusional, but it is consistent with the previous booms.
Not surprisingly, the 20-quarter percent change at an annual rate in real hourly compensation closely tracks the comparable growth rate in productivity. In other words, the current productivity growth boom that started at the end of 2015 has been reflected in improved real hourly compensation since then, and real compensation is one of the best measures of purchasing power and the standard of living.
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