Rocket Fuel Newsletter – 05/20/2024

McDonald’s announced their newest McFlurry flavor last week: the Grandma McFlurry, which combines hard candy pieces, syrup and vanilla ice cream into what basically amounts to a Werther’s Original. Next for McDonald’s: fixing the McFlurry machines so we can actually try the new flavor.

In this edition: the good and the bad of AI, April inflation numbers and how unemployment has fluctuated over the past 25 years.

Fuel Up! 🚀

Consumer Price Index April Report

CPI for all items rose 0.3% in April, a slight drop from the 0.4% rise in March. Core CPI (all items excluding food and energy) increased 3.6% over the last 12 months. This is the lowest annual Core CPI increase since April 2021.

Cooling CPI comes as good news to those hoping to see inflation stabilize and continue to drop toward the Federal Reserve’s 2% goal.

Get the full report here.

Does AI Do More Harm Than Good?

According to a recent article published by the Pew Research Center, one out of four teachers believe that AI in education is doing more harm than good. While many teachers are still formulating their opinions, only 6% of teachers say AI tools are providing more benefit than harm.

Check out the article from Pew Research Center here.

Planet Fitness To Increase Prices

For the first time in 25 years, Planet Fitness will be raising the cost of their base membership from $10/month to $15/month. The new price will only apply to new members, while current members will continue their current dues.

While a 50% increase may seem steep, $10 in 1998 (when the price was set) is equivalent to $19.24 today. Don’t worry, though, Costco hot dogs are holding steady at $1.50!

Last week, we talked about employment data and the reports that are crucial to determining the health of the labor market. Expanding on that topic, it’s important to put today’s current state into historical context when we (and more importantly, the Fed) evaluate the overall health of the economy.

With that in mind, let’s understand how key employment measures have looked during the best and worst economic times in recent memory.

2002 – 2010

After a short recession in 2001, the US economy began to stabilize in 2002 and started a period of growth that lasted through 2007. The unemployment rate steadily declined and stayed below 5% throughout 2006 and 2007.

The growth in the economy was led by finance and real estate, but it came to a crashing halt in 2008. The Great Recession, fueled by the subprime mortgage crisis, turned out to be one of the worst economic downturns in history. The unemployment rate rose rapidly toward 10% while home prices and the stock market sank.

With many businesses cutting back or closing due to the impacts of the financial crisis, the number of employees dropped drastically and retreated to levels not seen since the early 2000s.

2011 – 2019

Following the Great Recession was a period of recovery and prosperity. The unemployment rate, coming off the highs of the recession, went down steadily throughout the 2010s and was more than cut in half when it was all said and done.

The number of employees also recovered and was impressively a straight line up throughout the entire decade.

2020 – Present

COVID-19 halted the impressive economic growth of the 2010s. Almost overnight, the unemployment rate went from below 4% to over 14%. As the world was shutting down, many were left wondering when they would be able to return to work.

Slowly over the next few years, things began to return to normal, and unemployment started to come down from the pandemic highs to pre-pandemic levels in early 2022.

A similar trend is seen in the number of employees. Nearly 2 years after the height of the pandemic, employment levels returned to their prior norms.

What Does This Mean For Today's Economy?

Present day, employment remains high. Unemployment is currently below 4% and nonfarm employment numbers are at their highest levels ever.

As discussed last week, this is both good and bad. It’s good that people are finding gainful employment, but the fact that inflation remains high means that 1) there’s a lot of money flying around the economy and 2) people are making enough to spend it and keep demand higher than supply.

With inflation remaining sticky, this has led the Fed to not cut interest rates. However, if the labor market starts to falter, that could change the outlook for Fed policy.

Should unemployment rates rise and fewer people have jobs, spending could diminish and bring demand back in line with supply. But if unemployment rates rise too much or too quickly, it could easily send the economy into a recession.

It’s all part of the Fed’s balancing act in maintaining their dual mandate, which we’ll touch on further in next week’s Caffeinated Trends. Stay tuned!

After a few weeks off of the leaderboard, Michael Bazavilvazo once again posted the top time of the week, completing last week’s puzzle in 22 seconds. There were lots of great times last week. Congrats to everyone who may have put up a new personal best!

This week’s puzzle gets 4 Rockets out of 5.

Click here to solve!