May CPI: glass half-empty, glass half-full

The latest Consumer Price Index report paints a complex picture of the U.S. economy: on one hand, inflation remains stubbornly high at 4.2% year-over-year, driven by soaring energy prices due to the ongoing war in the Middle East, which is straining household budgets and raising fears of unanchored inflation expectations. Yet on the other hand, core inflation—excluding food and energy—has slowed, suggesting that the worst of the price surge may be past. Key indicators like falling furniture prices, stable vehicle costs, and easing gas prices point to a potential peak in inflation, especially as businesses absorb energy costs rather than passing them fully to consumers. But the deeper story is one of structural economic fragility: a sharp drop in immigration—down to 320,000 last year from over 1.3 million in 2024—is already slowing labor force growth and threatening long-term productivity and innovation. A Yale Budget Lab report warns that this immigration crackdown could result in 9,000 to 16,000 fewer new firms by the early 2030s, with lasting effects into the 2070s. Meanwhile, even summer camps are being rebranded as career-building experiences to attract teens, highlighting how even leisure is now filtered through economic and professional utility. The Federal Reserve’s upcoming meeting under new Chair Kevin Warsh looms as a pivotal moment, with global central banks facing divergent pressures.