Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
To nobody’s surprise, the Federal Reserve announced last Wednesday it is ending its bond-buying program earlier than originally planned. They made no changes to interest rates. What does this mean? Fed Chairman Powell has made it clear the Fed won’t raise rates until they wind down these monthly bond purchases. The announcement puts the Fed on track to starting hiking rates in the Spring. The Fed expects to raise rates three times next year, and twice in both 2023 and 2024. In their latest economic projections, the Fed has GDP rising 4.0% next year, while inflation falls from 5.3% in 2021 to 2.6%. Both these estimates were revised upward from their September forecast. Like many economists, I believe the Fed should have begun raising rates months ago as inflation is rising at its fastest pace in four decades. While it’s great the Fed is starting the process of tightening, their lateness to the party has already hurt Americans who have seen their real income fall for the past several months.
After October's Surge, Retail Sales Disappoint
Retail sales rose just 0.3% in November, after a huge 1.8% jump the prior month. Higher prices and shortages of goods—along with the strong October number driven by early holiday shoppers—were the culprits here. Don’t worry too much about this, as retail sales were 18.2% higher than last November. Despite spiking inflation, economic growth remains very strong in the U.S., with the latest GDPNow forecast at a 7.0% growth rate for 4Q21.
New York State Continues to Lose Millionaires
According to the latest IRS data, the number of tax filers in NYS with incomes over $1 million fell 3.7% in 2019. What makes this a bit scarier is that nationally the number of millionaires rose 2.4%. Only five other states saw a decrease in millionaires in 2019, and only Oklahoma had a bigger decline than New York. I must admit I am surprised at Oklahoma’s drop, but while we’re talking about the Sooner State here is a list of their 10 richest people. President Biden’s Build Back Better Plan does have a provision to raise the SALT deduction cap from $10,000 to $80,000 until 2030, but even if that does pass, I don’t think that’s a big enough change to stop more people from leaving.