How the January jobs report could impact the Fed's monetary policy
TLDRIn a detailed discussion on the economic outlook, co-founder of the Economic Cycle Research Institute, Lockman Atuan, examines key economic indicators investors should monitor amidst a significant week featuring January jobs numbers and a Federal Reserve rate decision. Atuan highlights the importance of PMIs and the jobs report, indicating a slowdown in job growth and shifts towards part-time employment, signaling potential recessionary trends. Despite this, sectors like education, health, and government show strong job growth. Atuan also delves into the nuanced impacts of tech layoffs, small business hiring challenges, and the Federal Reserve's efforts to combat inflation, suggesting a complex path towards achieving a stable economic environment.
Takeaways
- π Jobs growth has been slowing since 2022, indicating economic weakness
- π Weekly work hours and temporary employment are down sharply, also recessionary signs
- π Education, healthcare and government job growth remain strong anchors for employment
- π€ Small companies are reluctant to lay off workers despite economic softness
- π Supply chain issues and inflation resurgence threaten the Fed's inflation fight
- π Globally, early signs of bottoming out and price rises may limit Fed policy options
- π Markets seem overly optimistic on inflation outlook compared to economic risks
- β³ Immigration and post-COVID labor impacts still create some wage pressure
- πΌ Managers are cutting worker hours rather than jobs to maintain flexibility
- π¦ The Fed likely wants to see negative jobs growth to make serious inflation progress
Q & A
What are the key economic data points investors should watch this week according to Lockman Atuan?
-According to Lockman Atuan, the key economic data points investors should watch this week are the PMIs (purchasing managers indexes) and the jobs report.
What trends indicate some weakness in the underlying jobs data?
-Some concerning trends include declining weekly hours for workers, a shift towards more part-time versus full-time jobs, and a 10% drop in temporary employment levels.
Which sectors have shown resilience and steady jobs growth even during economic slowdowns?
-Education, health, and government sectors have shown steady jobs growth even during economic slowdowns.
How have larger companies differed from smaller companies in their hiring and layoff approaches?
-Larger tech companies have been letting employees go to adjust, while smaller mom-and-pop employers have had a hard time hiring and are very reluctant to let people go.
What is the Fed's goal with respect to inflation and the job market?
-The Fed wants to bring down inflation, even if that means seeing slower or negative jobs growth, as they believe taming inflation should be the priority.
What could disrupt the projected glidepath down for inflation according to Atuan?
-Supply chain disruptions like the situation in the Red Sea and rising inflation globally could disrupt the downward glidepath and limit the Fed's leeway in 2024.
Why does Atuan believe inflation will likely cycle back up in 2024?
-He says inflation is cyclical, so after dropping it likely won't stay low forever, and indicators of rising global inflation could contribute to inflation ticking up again in 2024.
How have investor expectations differed from Atuan's outlook on inflation?
-Investors have been more optimistic that inflation will steadily decline, while Atuan believes it is likely to cycle back up in 2024.
What impact have recent tech industry layoffs had?
-The layoffs have more impacted conversations and perceptions than showed up significantly in jobs data yet, but likely will have a bigger effect in upcoming reports.
Why have small companies taken a different approach to layoffs versus large companies?
-Smaller companies have struggled much more with hiring challenges, so are reluctant to let people go and more likely to reduce hours or shift to part-time.
Outlines
π Jobs growth slowing but still resilient overall
Paragraph 1 discusses how jobs growth has been slowing since 2022 but remains relatively resilient, especially in education, health, and government sectors. It notes concerning signs like declining weekly hours and a shift towards more part-time positions. The Fed likely wants some cooling in the jobs market to help tame inflation.
π Inflation expected to keep cycling up and down
Paragraph 2 talks about how inflation is on a glide path down currently but historically tends to cycle up and down, rather than staying low permanently. Supply chain issues like the Suez Canal blockage could limit the Fed's room to maneuver on rates in 2024.
Mindmap
Keywords
π‘PMIs
π‘Jobs Report
π‘FED Rate Decision
π‘Recession Indicators
π‘Temporary Employment
π‘Inflation Fight
π‘Supply Chain Issues
π‘Tech Layoffs
π‘GDP Print
π‘Global Inflation Cycle
Highlights
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Transcripts
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