Recent economic indicators present a paradox in the assessment of the U.S. economy’s health. While traditional signs point towards economic weakening—such as a softening labor market, collapsing yields, easing inflation, and plummeting commodity prices—several details contradict the narrative of an impending recession. Robust metrics in retail sales, TSA crossings, restaurant bookings, profit margins, hotel occupancy, and bank lending trends suggest a strong and even rebounding economy. Three overlooked indicators—the rising price of haircuts, the rebound in shelter inflation, and the U.S. government’s significant budget deficit in August—highlight that growth and inflation are likely to remain in the coming months.
1. Rising Prices in Labor-Intensive Services
In 2024, the prices of labor-intensive services, such as haircuts, childcare, and nursing homes, have seen significant inflation. As random as it might seem at first, haircuts have become an important indicator of core inflation, reflecting labor and rent costs without the adjustments that affect other goods and services. The price of a haircut rose by 4.5% annually in 2024, with a sharp acceleration to 7.2% in July. This consistent rise in haircut prices reflects a broader inflationary trend in wage-intensive services.
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