Jeffrey Cleveland

A lot of people paying attention to retail sales this morning, but we're looking at the employment cost index because that tends to filter into a view on inflation via wage pressures that filter into all sorts of things, but in particular, services inflation.

And this is the softest reading on my chart since 2021.

2021.

Yes, you are precisely correct, sir, before the inflation eruption.

So I think this is important.

When the central bank is looking to see what they might do next, I think moderating wage pressures, moderating inflation pressures will be key to that story.

And this is a data point in favor of additional rate cuts, in my view.

I would say it's a flip side.

It's a symptom of a softening labor market.

If the labor market were stronger, if we were adding more jobs, if we had a strong demand for labor, we would see more wage growth.

And we're seeing the opposite right now.

So it is sort of a reflection of a softening of the labor market.

The good news, especially for those folks on Wall Street at least, is that the much-watched core CPI, so it excludes food and energy, was a bit softer than expected.

It was up 0.2% on the month, and it's up 2.6% year-on-year, which is a little softer than expected.

I think that's what markets are reacting to this morning.

I think that keeps the dream alive, Sabri, for rate cuts.

The Federal Reserve, the central bank is waiting for inflation to continue to moderate.

There were some fears that inflation would be a little bit hotter in December after a pretty soft November report.

So the fact that it came in softer than expected is overall good news.

Well, food in general was up quite sharply.