Week XIII - Goods vs. Services Inflation, the Job Market, Student Debt, Only in California, March Madness, and Easter
So much news, so little space. But I’ll give it a try. Let’s start with the numbers.
Austan Goolsbee, the Chicago Fed President, said interest rates could go either way. By ‘either way’, he means there could be a Fed rate cut or a rate increase this year. The big unknown is what inflation will do. Also, see “Jobs” below.
That makes it easy for business planning.
Speaking of inflation… Costs of Services vs. Costs of Goods.
As it turns out, the inflation rate on services is much higher than the inflation on goods.
February services inflation was 3.1% vs. 1.2% for goods.
Caveat: We’ll see how the price of gas impacts the goods number in March.
Regardless, it’s the cost of services that is impacting the CPI numbers and keeping them over the target 2% range.
In the 2010s, that inflation averaged 2.1%.
In the last report, pet services rose 7.3% and delivery services rose 7.1%.
There isn’t anything you wouldn’t do for Fido, and God forbid you give up your DoorDash.
Besides, during the pandemic that must not be named, we bought all of our goods. Now, everyone wants experiences.
Have you looked at ticket prices for sporting events and concerts? Yep, me too. That’s all I do; look. The cheap seats for March Madness were over $300 in San Diego. Sorry, Boomer rant.
Finally… Jobs and trends.
Initial jobless claims held steady at 210,000. It’s like Groundhog Day.
So, it’s kind of good news, but here’s the deal.
Pre-pandemic, i.e., February 2020, 1,100,000 people reported that they were out of work for 27 weeks or longer.
This past February, that number was 1,900,000. Hmm. That should make the Fed take notice.
37% of folks had exhausted their benefits in February. The year before, 35.4% had exhausted their benefits, and in 2024, it was 33%.
That is a weakening job market.
It could be worse, but at this point, unemployment remains at 4.4%. Hiring has slowed, but companies are firing even less.
The Econ guys call this “low-hire, low-fire”. Awesome if you have a job, not so much if you are looking for one.
Student Debt
We talk a lot about interest rates, inflation, and tariffs, but there is something else lurking under the economy’s surface.
Student loans are back.
There are 43,000,000 federal student loan borrowers.
10,700,000 are behind on payments, including 7,700,000 already in default.
That’s 1 out of every 4 borrowers in or beyond trouble.
What Changed?
Payments resumed in late 2023, grace periods and “on-ramp” protections expired in 2024, and reality showed up in 2025.
And reality looks like missed payments.
Folks, this is a consumer cash flow problem. Millions of consumers are now:
Redirecting income to loan payments, falling behind on other obligations, or cutting discretionary spending.
Regardless, over 10,000,000 have had a hit to their credit score.
This translates to less dining out, fewer upgrades, and more putting things off.
As a business owner, your customers may be under new financial pressure, and your employees may be stressed or distracted.
When 10,700,000 borrowers fall behind, the ripple effects don’t stay in the loan market… they show up at your register.
From the category “Only in California”
The SEIU – that is the Service Employees International Union – is negotiating a new contract with the State of California, and one of the issues is WFH – working from home – or as they call it, telework.
You may recall that many government offices were vacated during the epidemic that must not be named. They were subsequently ordered to return to work two days a week in 2024, 4 years later.
Weirdly, the offices were full of people on Tuesday and Wednesday.
Hmm. Do you think it could be because that gave everyone a five-day weekend every week? Sorry, just a cynical boomer typing away here.
In March 2025, the California Governor ordered everyone back to four-day workweeks. Oh, the uproar! That got pushed back to July 1 this year.
And now, cue the labor union negotiations. The demands:
Full-time telework for eligible workers and free parking for those required to come in.
I must say, I do support the free parking thing.
And for those that have to actually go to work, monthly stipends of $500 for “high-crime worksite”, $25 daily commuter stipend, and a $25 daily “downtown investment stipend” since the alleged reason for requiring employees back to the office was to help all the small businesses around state offices.
Mind you, they only had to go back to the office in June 2024. That’s four years of working from home, or working other jobs, or whatever.
I am NOT making this up.
March Madness
The tournament will cost U.S. employers $12,100,000,000 in lost productivity.
Isn’t it really redirected productivity?
24.6% of employees admit to watching games during work hours.
Thank you, Captain Obvious!
They also spend, on average, 90 minutes a day tracking games, with a third topping two hours.
In the category of “If you can’t fight ‘em, join ‘em”, some managers are embracing employee interest in games during working hours.
They are setting up dedicated spaces where employees can watch the contests and discuss their tournament brackets, offering competitions with prizes and allowing employees to wear swag on the job.
I’m guessing it depends on whether the boss is into it.
When you think about it, it’s really not a lot different than the two weeks of the Olympics or the World Cup.
Tax Filing is April 15
That’s all the reminder you are going to get.
Oh, and you can postpone that to October 15, but if you do and you owe taxes, you need to send the check in now.
There are certain weeks on the calendar when history, faith, and culture overlap—and this is one of them. Beginning Monday, Christians enter Holy Week, culminating in Easter. At nearly the same time, Jewish families gather for Passover, one of the world's oldest continuously observed traditions.
For many of us, it’s a special week where family gets together to celebrate Easter. As has become customary, we are doing that at our home again this year. That’s a lot of family with a big honey-do list, so there may or may not be a Russell Report next week. Regardless, use this week (and next) to reflect on what makes you and your business successful, whether it’s your own skill set, your team, the grace of God or all three.
It’s a good reminder that not everything in life moves with interest rates.
Have a wonderful Easter!
