Review of Fourth Quarter 2024
A new year, a new administration, and so many more challenges and opportunities lie ahead. Internationally, 2024 ended in a big bang with the world’s public debt bubble potentially hitting the equivalent of $100 trillion, which is about 93% of the global gross domestic product (GDP), an increase by 10 percentage points compared to pre-pandemic levels. By 2030, debt levels are predicted to match those of world GDP.(1)
Nationally and toward the end of 2024, all eyes were on the events that followed the unfortunate loss of the CEO of UnitedHealthcare, the largest private health insurance company, Brian Thompson. The hateful reactions of some people toward the health insurance model are both alarming and expressive of the urgency of the need to reverse course to focus on prevention more than treatment of chronic diseases when considering priorities of our healthcare financing policies. Such a move provides a more sustainable and cost-effective alternative to the exorbitant health insurance approach that will increasingly get out of reach as the nation ages.
The dawn of 2025 brought in President Trump’s administration. Perspectives on the U.S. economy are generally good despite the anticipated trade wars; U.S. sovereign debt and proposed fiscal reforms and restructuring; and legal battles and impediments to Trump’s actions.
The healthcare bureaucracy will undergo a total facelift as Trump’s cabinet picks are confirmed and start to hold offices, a process that will be mostly done by the end of the first three month of 2025 (Table 1). Some of the nominees’ names, particularly Robert Kennedy, stirred up controversy mainly because of their vaccination skepticism. Against mounting fears of his long-term anti-vaccination behavior, when it comes to making decisions, ideologies will be sidelined because no politician is going to want to cut his or her career short by being the cause of a “self-inflicted” epidemic. Practically speaking, the system has sufficient checks and balances to prevent any “overtaking”; however, the impact of anti-vaccination propaganda on the public can be detrimental if such messages were to be mainstreamed and megaphoned. Also, CMS could become more open to the idea of privatization of some services, a step that would, it is hoped, help with the efficiency and sustainability of healthcare financing.
Gross Domestic Product
Overall, the U.S. gross domestic product (GDP) experienced robust growth during 2024 (Figure 1). By the end of the year, real GDP grew by 2.3% on an annual basis, driven by a jump in consumer spending, a marginal increase in government spending and imports, a slight slowdown in exports, and a 1% deep dive in investments.(2)
Healthcare emerged as the largest contributor to consumer spending (services), primarily with the increases in hospitals, nursing, and outpatient services.(3)
Figure 1. 2024 U.S. gross domestic product.(2)
Fiscal and Monetary
After a drastic monetary action in September, the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve Bank (Fed) had instead made two smaller cuts, each amounting to a quarter percentage point during the last two months of 2024, which put the interest rate at the 4.50% to 4.75% and 4.25% to 4.50% ranges, respectively.
No big fiscal changes have been made by the lame-duck administration, as anticipated; however, the time has come to see when election promises on tax policy and government spending will be adopted and decided upon.
Inflation and Prices
By the end of 2024, the producer price index (PPI) had advanced by 3.3% for producers and companies, a significant move from the 2.7% increase in the PPI reported during the preceding year, 2023. During the last quarter of 2024, the annual PPI took a clear upward trajectory during the period of October to December (Figure 2; last three data points/readings of the green line), wrapping up the year at 3.3%, the highest PPI (YoY) since that of February 2023 (4.7%):
October PPI = 2.4% (YoY); 0.2% (MoM);
November PPI = 3.0% (YoY); 0.4% (MoM); and
December PPI = 3.3% (YoY); 0.2% (MoM).
Figure 2. 2024 annual inflation rates of producer price index (PPI), consumer price index (CPI), and personal consumer expenditure (PCE) (%).(6,7,8)
It is important to take the time to discuss three points that can be observed from Table 2 (especially the year-over-year [YoY] column):
Dental care administrators seem to have effective pricing strategies that help offset the cost of chemicals and materials, one of the main cost items in dentistry that climbed significantly during the last year. Some price moves should be anticipated, particularly toward and during the second quarter of 2025.
Medical laboratories and imaging centers, both stand-alone and in-house departments within healthcare organizations, are putting themselves under enormous financial pressures. Although the costs of their inputs (for example, diagnostics and imaging machines for labs and radiology centers, respectively) went up during the last year, their prices remained almost flat. This is an early warning sign about the ability of these facilities to meet their future obligations (e.g., maintenance and machinery improvements costs).
Other healthcare collaborators appear to have struck a fine balance that keeps them good for now.
On the consumer price index (CPI) and consumer inflation front, and unlike the third quarter where the inflation stuck to 0.2% incremental increases in each of the quarter’s three months, the rate of inflation showed a little acceleration towards the year end:
October CPI = 2.6% (YoY); 0.2% (MoM);
November CPI = 2.7% (YoY); 0.3% (MoM); and
December CPI = 2.9% (YoY); 0.4% (MoM).
During the 12 months of 2024, underlying inflation went up by 3.2%, on average, for all items except volatile food and energy, whereas it stood at a mere 2.8% for medical care.(5) During 2025, healthcare executives should aim to keep up with the overall rate of increase (i.e., core inflation) to sustain their establishments and their services to the community. This seems both a feasible and a winning strategic goal for the following two reasons:
During 2024, the core cost of medical care grew by 2.8%, which is much lower than the reported average of 3.2%. Therefore, there is room for improvement to bridge this gap.
It is anticipated that energy prices will continue to decline during 2025, following the 0.5% drop over the last year. This will create a “revaluation/repricing vacuum” that healthcare leaders should be aware of so as it is not filled by other essential areas of spending that have already made significant gains during the last year, such as food (2.5%), shelter (4.6%), and education (4%).(9)
Personal consumer expenditure grew by 2.3% (YoY) and 0.2% (MoM) during October.(10) Healthcare was in third place, following financial and recreation service sectors. In November, the picture was consistent with that in terms of both the annual and monthly figures, 2.4% and 0.1%, respectively.(11) Considerable income surpluses were reported during the last quarter, particularly during October, which boosted disposable income by 75% during that month (0.7%, up from the 0.4% reported during the preceding September). Healthcare marketing campaigns should focus on lifestyle offers, particularly toward the second and third quarters, which is the best way to funnel these savings and reenter them into the active economy and circulation instead of leaving them dormant.
Labor and Productivity
The U.S. employment situation had a roller coaster ride during the fourth quarter, in line with its tumultuous predecessor (Table 3). The first month of the last quarter took a strong hit from the significant work market disturbances and labor strike activities that took place in October. The U.S. job market tumbled during October, adding merely 12,000 posts, instead of the predicted 100,000, a number that had not been seen since the days of the 2020 COVID-19 pandemic. The unemployment rate remained constant at 4.1%.(15) As usual; healthcare was the leading sector, adding 52,000 jobs. in line with the past 12-months average of 58,000.
In a strong comeback, the U.S. job market added 277,000 jobs in November, with the unemployment rate inching a little higher, at 4.2%.(16) Healthcare was responsible for almost one-fifth, of that number, with payrolls ticking even higher, at 54,000. Ambulatory healthcare led the increase (22,000) followed by hospitals (19,000) and nursing homes (12,000).
December had the most hirings since March of 2024, with 256,000 payrolls entering the workforce, which, in part, helped push unemployment a little lower, to 4.1%.(17) The healthcare sector, with 46,000 payrolls, beat the retail trade, even during their busiest time of the year. During December, subsector contributions were relatively close to each other, with 15,000 jobs added by home care, followed by 14,000 in nursing care facilities, and 12,000 in hospitals.
By the end of 2024, the labor market had created a total of 2.2 million jobs, which came short of the 3.0 million that were added to the economy the year before. On average, healthcare added 57,000 jobs per month during 2024.(18)
The information on employer-reported workplace injuries and illnesses of 2023 was published in November of 2024. Figure 3A summaries the crude numbers and percentages of illnesses and injuries across various sectors.
Figure 3A. U.S. illness and injuries among workers in 2023.(19,20,21)
Numbers in thousands (above); percentages (below).
The top three observations from that work-related illnesses and injuries report are as follows:
Healthcare had the highest numbers of both workers’ illnesses and injuries (Figure 3B).
When these numbers are turned into percentages, the picture changes slightly which indicates the significance of healthcare as the employment powerhouse (it came in at fourth place in terms of proportions of illnesses and injuries combined; however, compared with other sectors, healthcare workers suffered the most of illnesses).
Nursing home managers should understand why illnesses are widespread in their facilities compared with other healthcare institutions. Their operational plans should consider potential short-term squeezes on their rosters secondary to illness-related absentees.
Figure 3B. Distribution of work-related illnesses and injuries across various types of healthcare services facilities.(22,23)
Looking Toward First Quarter 2025
It looks like 2025 will be a big year for the U.S. economy, with potential for unforeseen turbulence. The outlook for financial markets is promising.
On financial policy, on both fiscal and monetary fronts, most of the 2017 tax breaks are set to expire by the end of the year. However, an extension of the full package is the likely scenario with the executive and legislative (both House and Congress) branches of government now in harmony. The Fed also might need to deal with new players and factors that could affect its decisions or the way it operates.
References
Dabla-Norris E, Furceri D, Lam R, Menkulasi J. Global public debt is probably worse than it looks: elevated risks to public debt call for enduring and carefully designed fiscal adjustments.. International Monetary Fund blog. October 15, 2024. www.imf.org/en/Blogs/Articles/2024/10/15/global-public-debt-is-probably-worse-than-it-looks .
Gross Domestic Product, 4th Quarter and Year 2024 (Advance Estimate). Bureau of Economic Analysis. www.bea.gov/news/2025/gross-domestic-product-4th-quarter-and-year-2024-advance-estimate .
Gross Domestic Product, 4th Quarter and Year 2024 (Advance Estimate) [BEA 25-02]. Bureau of Economic Analysis. www.bea.gov/sites/default/files/2025-01/gdp4q24-adv.pdf .
Economic news release. Table 2. Producer price index percent changes for selected commodity groupings by Final Demand–Intermediate Demand category, seasonally adjusted. Bureau of Labor Statistics. www.bls.gov/news.release/ppi.t02.htm .
Economic news release. Table 2. Consumer price index for all urban consumers (CPI-U): U. S. city average, by detailed expenditure category. Bureau of Labor Statistics. www.bls.gov/news.release/cpi.t02.htm .
United States Producer Prices Change. Trading Economics. https://tradingeconomics.com/united-states/producer-prices-change .
United States Inflation Rate. Trading Economics. https://tradingeconomics.com/united-states/inflation-cpi .
United States PCE price index annual change. Trading Economics. https://tradingeconomics.com/united-states/pce-price-index-annual-change .
Economic News Release. Consumer price index summary. Bureau of Labor Statistics. February 12, 2025. www.bls.gov/news.release/cpi.nr0.htm .
Personal income and outlays, October 2024. Bureau of Economic Analysis. www.bea.gov/news/2024/personal-income-and-outlays-october-2024 .
Personal income and outlays, November 2024. Bureau of Economic Analysis. www.bea.gov/news/2024/personal-income-and-outlays-november-2024 .
Economic News Release. Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail—economic news release-employment situation. Bureau of Labor Statistics. www.bls.gov/news.release/empsit.t17.htm .
Economic News Release. Table B-2. Average weekly hours and overtime of all employees on private nonfarm payrolls by industry sector, seasonally adjusted—economic news release-employment situation. Bureau of Labor Statistics. www.bls.gov/news.release/empsit.t18.htm .
Economic News Release. Table B-3. Average hourly and weekly earnings of all employees on private nonfarm payrolls by industry sector, seasonally adjusted. Bureau of Labor Statistics. www.bls.gov/news.release/empsit.t19.htm .
Dwyer C. October 2024 jobs report: Only 12,000 jobs added, tempered by disruptions. J.P. Morgan Wealth Management. November 4, 2024. www.jpmorgan.com/insights/outlook/economic-outlook/jobs-report-october-2024 .
November 2024 jobs report: 277,000 jobs added, staging a robust rebound. J.P. Morgan Wealth Management. December 9, 2024. www.jpmorgan.com/insights/outlook/economic-outlook/jobs-report-november-2024 .
Curran E. Blowout US jobs report puts Fed rate cuts on back burner. Bloomberg. January 10, 2025. www.bloomberg.com/news/live-blog/2025-01-10/us-employment-report-for-december .
The employment situation December 2024. Bureau of Labor Statistics. www.bls.gov/news.release/empsit.nr0.htm .
Number and rate of nonfatal work illnesses in private industries. U.S. Bureau of Labor Statistics. www.bls.gov/charts/injuries-and-illnesses/number-and-rate-of-nonfatal-work-illnesses-by-industry.htm .
Number and rate of nonfatal work injuries in private industries. U.S. Bureau of Labor Statistics. www.bls.gov/charts/injuries-and-illnesses/number-and-rate-of-nonfatal-work-injuries-by-industry.htm .
Number and rate of nonfatal work injuries and illnesses in private industries. U.S. Bureau of Labor Statistics. www.bls.gov/charts/injuries-and-illnesses/number-and-rate-of-nonfatal-work-injuries-and-illnesses-by-industry.htm .
Number and rate of nonfatal work illnesses in detailed private industries. U.S. Bureau of Labor Statistics. www.bls.gov/charts/injuries-and-illnesses/number-and-rate-of-nonfatal-work-illnesses-by-industry-subsector.htm .
Number and rate of nonfatal work injuries in detailed private industries. U.S. Bureau of Labor Statistics. www.bls.gov/charts/injuries-and-illnesses/number-and-rate-of-nonfatal-work-injuries-by-industry-subsector.htm .