Unadorned Notes: January 1-3, 2025
Jobless Claims Reach Eight-Month Low; Millennials Face Delayed Adulthood; Chinese Stocks Plunge in 2025; Microsoft Boosts AI Investments; Mike Johnson Retains Speakership
Economics, Finance, and Business
Jobless Claims Reach Eight-Month Low: U.S. initial unemployment claims fell by 9,000 to 211,000 for the week ending December 28, 2024, the lowest level since April 2024, indicating sustained labor market resilience. The four-week moving average declined to 223,250, reflecting stable conditions despite year-end volatility. The labor market’s strength aligns with the Federal Reserve’s projection of limited interest rate cuts in 2025, as low layoffs counter inflation pressures. Continuing claims dropped to 1.844 million, though some regions, including Michigan and Ohio, face manufacturing-related job losses. Separately, November 2024 construction spending was flat, with gains in single-family housing offset by declines in multi-family projects and public construction.1
U.S. Manufacturing Nears Recovery: The U.S. manufacturing PMI rose to 49.3 in December 2024, its highest level in nine months, signaling a gradual recovery despite remaining below the 50 threshold for the ninth consecutive month. Production rebounded, and new orders expanded for the first time since March 2024, though challenges persist, including higher tariff risks and slowing demand in key sectors like transportation equipment and machinery. Seven industries, including primary metals and electrical equipment, reported growth, while others continued to contract. Manufacturers have been stockpiling inventories and advancing material purchases to mitigate potential tariff impacts. Factory employment weakened further, with the ISM jobs index falling to 45.3, reflecting ongoing struggles in the sector.2
Millennials Face Delayed Adulthood: Economic and social shifts have led many Americans in their 30s to delay or abandon traditional milestones like marriage, homeownership, and parenthood. Despite rising incomes and wealth compared to prior generations, rising costs, student debt, and changing societal norms have left many feeling unable to achieve financial independence. Marriage rates have dropped sharply, with a third of young adults projected to never marry, while homeownership is increasingly out of reach, with the median age of first-time buyers now 38. Heightened expectations for a “good life” and broader cultural changes have also redefined adulthood, leading some to prioritize personal fulfillment over conventional goals. This combination of factors has created a generation grappling with uncertainty and questioning what it means to be a successful adult.3
Chinese Stocks Plunge in 2025: China’s CSI 300 index fell 2.9% on the first trading day of 2025, marking its sharpest New Year drop since 2016, as weak manufacturing data dampened investor sentiment. Ongoing economic concerns, including low consumption, deflation, and high debt levels, continue to weigh on markets despite recent government stimulus efforts. Beijing’s measures to stabilize the property sector and loosen monetary policy have improved growth projections, with the World Bank raising its 2025 GDP forecast to 4.5%. However, weaker-than-expected retail sales, trade figures, and consumer inflation have tempered recovery hopes. Investor anxiety is further exacerbated by U.S. tariff threats, which could significantly impact China’s export-driven economy.4
Alcohol Cancer Warning Hits Stocks: Shares of major U.S. and European alcohol producers fell after U.S. Surgeon General Vivek Murthy called for cancer warnings on alcoholic beverage labels, citing increased cancer risks even at low consumption levels. Brown-Forman, Molson Coors, and Constellation Brands saw declines of up to 3%, while European producers like Diageo and Pernod Ricard dropped as much as 4.5%. Brewers, including Anheuser-Busch InBev and Heineken, also experienced losses. The proposed warning labels require Congressional approval, with analysts predicting limited impact on consumer behavior. The advisory has reignited concerns over health risks associated with alcohol consumption.5
Biden Blocks U.S. Steel Sale: President Joe Biden blocked Nippon Steel’s $14.1 billion acquisition of U.S. Steel, citing national security concerns after a months-long review by the Committee on Foreign Investment in the U.S. (Cfius). The decision, supported by the United Steelworkers union, ensures the 124-year-old steelmaker remains domestically owned, aligning with Biden’s protectionist policies and union advocacy. Nippon Steel criticized the ruling, alleging political influence and pledging to challenge the decision on due process grounds. The blocked sale has raised concerns over future foreign investment in the U.S., with Nippon Steel warning of a chilling effect on allied companies. U.S. Steel shares fell nearly 7% following the announcement, while Nippon Steel faces a $565 million termination fee.6
Tesla Deliveries Decline in 2024: Tesla’s 2024 vehicle deliveries fell year-over-year, marking the first annual decline in the company’s history and contributing to a 5% drop in its stock price. The decline reflects market saturation of Tesla’s current lineup and poses challenges to its ancillary services, such as autonomous driving software and charging networks. Management projects 20%-30% deliveries growth in 2025, driven by a new lower-priced vehicle and Level 3 autonomous driving software launches, though analysts anticipate delays. Tesla’s energy storage segment saw record growth in 2024, offsetting some concerns about automotive performance.7
Microsoft Boosts AI Investments: Microsoft is set to invest $80 billion in fiscal 2025 to expand its AI-driven data center infrastructure, with over half of the spending focused in the United States. Capital expenditures for the first quarter rose 5.3% to $20 billion, underscoring the company’s commitment to scaling AI capabilities. As OpenAI’s primary backer, Microsoft is leveraging its exclusive partnership to solidify its leadership in the AI sector. Analysts project its total fiscal 2025 capital expenditure to reach $84.24 billion, reflecting its focus on cutting-edge computing power. Brad Smith, Microsoft’s president, highlighted private sector innovation as a key factor in maintaining U.S. dominance in the global AI race.8
U.S. Banks Exit Climate Alliance: Morgan Stanley, Citigroup, Bank of America, and others have withdrawn from the Net-Zero Banking Alliance (NZBA), a UN-backed coalition formed to align financial activities with net-zero emissions by 2050. Banks cited political pressures, legal concerns, and feasibility challenges as reasons for their exit, with JPMorgan Chase also reportedly reconsidering membership. The departures reflect broader backlash against environmental, social, and governance (ESG) initiatives, amplified by conservative groups and the incoming Trump administration’s expected regulatory rollbacks. Critics, including MIT professor John Sterman, have labeled the exits as short-sighted responses to political shifts and climate skepticism. Despite leaving the coalition, some banks, like Morgan Stanley and Citi, reaffirmed their commitment to net-zero goals through alternative strategies.9
U.S. Politics, Policies, and Geopolitics
Mike Johnson Retains Speakership: Republican Mike Johnson narrowly won reelection as House Speaker with a 218-215 vote after last-minute negotiations and support from President-elect Donald Trump. The slim Republican majority of 219-215 marks the narrowest House control since 1930, complicating efforts to advance legislative priorities. Johnson faced resistance from hardline conservatives but secured support by pledging broader member involvement and emphasizing alignment with Trump’s agenda. Challenges ahead include addressing the debt ceiling and advancing key conservative goals like spending cuts and immigration crackdowns.10
Trump Sentencing Set: President-elect Donald Trump will be sentenced on January 10, 2025, after being convicted of falsifying business records related to a hush money payment to Stormy Daniels. Justice Juan Merchan ruled out jail time, indicating a likely sentence of unconditional discharge, which would allow Trump to appeal. Trump’s motions to dismiss the case, citing his presidential election victory and public service, were rejected, with the judge emphasizing the importance of upholding the rule of law. The case marks the first time a U.S. president-elect has faced sentencing, raising unprecedented legal and political implications. Trump denies wrongdoing and has called the prosecution a politically motivated effort to undermine his presidency.11
U.S. Nears Debt Ceiling Deadline: The U.S. federal debt ceiling, reinstated at $36.1 trillion, is projected to be reached between January 14 and January 23, 2025, prompting the Treasury to implement extraordinary measures to prevent default. President-elect Donald Trump has pressured Republicans to address the issue before his inauguration, emphasizing spending cuts alongside any debt limit increase. House Republicans have proposed a $1.5 trillion debt ceiling hike paired with $2.5 trillion in spending cuts, but internal divisions and Democratic opposition pose challenges. The timeline for resolution will depend on tax revenues, disaster spending, and economic performance, with default risks growing if Congress delays action. A failure to raise the ceiling could disrupt federal payments, increase borrowing costs, and destabilize global financial markets.12
Court Blocks FCC Net Neutrality: The Sixth Circuit Court of Appeals ruled that the FCC lacks authority to regulate broadband under telephone service rules, effectively ending its net neutrality push. The decision follows the Supreme Court’s recent curtailment of agency powers under the Chevron deference doctrine. Outgoing FCC Chairwoman Jessica Rosenworcel urged Congress to protect open internet principles, acknowledging the failure of the FCC’s efforts. Republican Commissioner Brendan Carr, set to become FCC chair, praised the ruling and criticized the Biden administration’s regulatory approach as unnecessary. Industry opposition and a delayed Democratic FCC majority had already weakened the commission’s 2023 rule-making campaign.13
China Imposes U.S. Export Controls: China has added 28 U.S. defense-related companies, including Lockheed Martin and Boeing Defense, to its export control list, citing national security concerns. Experts view the move as largely symbolic, aimed at signaling strength ahead of the incoming Trump administration, which has threatened aggressive tariffs on Chinese goods. The targeted companies, mostly disconnected from direct business with China, are expected to experience minimal impact. Analysts argue that more significant measures, such as targeting automotive supply chains or financial entities, would have greater economic consequences. The export controls reflect ongoing tensions as both nations prepare for potential trade and policy clashes under Donald Trump’s presidency.14
Suspected Chinese Underwater Drone Found: A suspected Chinese underwater drone, marked HY-119, was discovered near Masbate, Philippines, raising national security concerns amid ongoing South China Sea tensions. Philippine police identified the device as Chinese-made, likely used for navigation and reconnaissance, and handed it over to the navy for further analysis. The discovery follows increased Chinese maritime presence in the Philippines’ exclusive economic zone, including the deployment of “The Monster”, the world’s largest coast guard ship, at Scarborough Shoal. Clashes over disputed areas, such as the Spratly Islands, have intensified under President Ferdinand Marcos Jr., who has resisted China’s territorial claims. Despite provocations, Marcos has ruled out deploying warships to avoid escalating the conflict.15