The rapid build-out of data centers to power AI is consuming so much energy that it's creating a broad, national increase in electricity costs. This trend is now a noticeable factor contributing to CPI inflation and is expected to persist.
Due to budget and staffing cuts at the Bureau of Labor Statistics, more than 33% of the Consumer Price Index is now estimated rather than directly surveyed. This significant increase in imputation questions the reliability of a key metric for economic policy.
Recent stress in credit card and auto loan markets is concentrated in loans originated in 2021-2023 when stimulus and looser standards prevailed. Lenders have since tightened, and newer loan portfolios are performing better, suggesting the problem is not spreading systemically.
In a highly concerning paradox, delinquency rates for subprime auto loans are now higher than they were during the 2008 financial crisis when unemployment was 10%. This signals extreme stress among lower-income consumers even in a strong labor market.
While the direct impact of tariffs may be temporary, the elongated process risks making consumers and businesses comfortable with higher inflation. Combined with questions about the Federal Reserve's political independence, this could unmoor expectations and make inflation persistent.
The inflationary impact of tariffs is appearing slower than economists expected. Companies are hesitating to be the first to raise prices, fearing being publicly called out by politicians and losing customers to competitors who are waiting out the trade policy uncertainty.
State-level unemployment insurance data, available during the government shutdown, shows a distinct trend. Initial claims are low (companies aren't laying people off), but continuing claims are elevated (it's hard for the unemployed to find new jobs), confirming a stagnant labor market.
The forcing mechanism to end a prolonged government shutdown isn't a calendar date but rather the breakdown of a critical, highly visible public service. The 2018-19 shutdown ended when air traffic control snarled, creating massive public pressure that politicians could no longer ignore.