' t know yet. while i believe inflation is likely on track to reach 2 percent in a sustainable manner, i am going to need to see more data to sort out whether january's cpi inflation was more noise than signal. this means waiting longer before i have enough confidence that beginning to cut rates will keep us on a path to 2 percent inflation. fortunately, the strength of output and employment growth means that there is no great urgency in easing policy, which i still expect we will do this year. more data, and more time, will tell whether january's cpi report was just a bump in the road to 2 percent inflation. the hotter - than - expected data that we received validates the careful risk management approach that chair powell has advocated in his recent public 1 / 5 bis - central bankers'speeches appearances. and, with most data indicating solid economic fundamentals, the risk of waiting a little longer to ease policy is lower than the risk of acting too soon and possibly halting or reversing the progress we've made on inflation. let me start with the outlook for economic activity, including what we have learned from the latest data. as i mentioned, real gdp grew strongly in the second half of 2023 and that momentum has led forecasters to predict continued solid growth in the first months of 2024. after expanding at a 4. 9 percent pace in the third quarter last year and at a 3. 3 percent clip in the fourth quarter, estimates for the first quarter of 2024 range from 1. 7 percent for the blue chip average of private sector forecasters to 2. 9 percent for the atlanta fed's gdpnow model, which is based on the data in hand. among that recent data is the institute for supply management's january survey of purchasing managers. for non - manufacturing businesses, the index increased to a level consistent with moderate growth. meanwhile, the manufacturing index, while still contractionary, rose to its highest level since october 2022, with rising orders and production, continued improvement in delivery times, and inventory positions among customers all pointing to favorable growth in demand. while the balance of the evidence is that growth has continued at a moderate rate, several indicators suggest some slowing. retail sales fell 0. 8 percent in january, after rising 0. 4 percent in december. while some of this drop is likely due to bad weather and technical issues related to seasonal adjustment, it was a surprise. it may indicate that consumer spending which ran higher than i

expected in the second half of 2023 is finally showing the effects of higher interest rates and a depletion of excess savings. i will be watching to see whether spending stays robust. a positive sign is that consumer confidence has continued to rise. one reason for that might be the labor market, whose surprising strength continued in january. as i mentioned, the u. s. economy created 353, 000 jobs in january, and 333, 000 in december, well above the 255, 000 a month average in 2023 and also well above what most estimate to be consistent with population growth. job growth in january was widespread across different sectors of the economy. there were job increases in three large sectors that have faced sharp labor shortages : health care and social assistance, leisure and hospitality, and state and local government. but there were also significant job increases in parts of the economy that tend to rise and fall with changes in the pace of economic activity - manufacturing, construction, retail trade and professional business services. the gains in manufacturing and professional services were at or near the highest posted in the previous 12 months. unemployment was steady at 3. 7 percent, nearly as low as it has been in 50 years. and while there were signs of slackening demand for labor over the course of 2023, those signs haven't been so clear recently. the 12 - month growth rate in average hourly earnings fell from 4. 7 percent in july to 4. 3 percent in december and then rose to 4. 5 percent in january. i have been focused on the number of job openings for the past two years as an indicator of labor demand. job openings fell from 12 million in april 2022 to 9 million in december 2023. we won't get data on job openings in january for a couple of weeks, but openings unexpectedly ticked up in december, and the rate of people quitting their jobs held steady, both indications that moderation in the labor market may have stalled. one data point does not make a trend, and these strong job reports come 2 / 5 bis - central bankers'speeches after a year of more or less steady loosening in the labor market, with supply increasing relative to demand. but it does tend to support the idea of continued moderate growth in economic activity. i will be looking for signs of continued loosening in the labor market, which by most measures is still considerably tighter than it was before the pandemic. everything about the outlook that i have mentioned so far is important