How the January jobs report could impact the Fed's monetary policy

Yahoo Finance
29 Jan 202406:12
EducationalLearning
32 Likes 10 Comments

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
  • πŸ˜€ Jobs growth has been slowing since 2022, indicating economic weakness
  • πŸ“‰ Weekly work hours and temporary employment are down sharply, also recessionary signs
  • πŸ‘ Education, healthcare and government job growth remain strong anchors for employment
  • πŸ€” Small companies are reluctant to lay off workers despite economic softness
  • πŸ˜• Supply chain issues and inflation resurgence threaten the Fed's inflation fight
  • 🌊 Globally, early signs of bottoming out and price rises may limit Fed policy options
  • πŸ“ˆ Markets seem overly optimistic on inflation outlook compared to economic risks
  • ⏳ Immigration and post-COVID labor impacts still create some wage pressure
  • πŸ”Ό Managers are cutting worker hours rather than jobs to maintain flexibility
  • 🏦 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
00:00
πŸ“‰ 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.

05:01
πŸŒ€ 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
πŸ’‘PMIs
Purchasing Managers' Indexes (PMIs) are economic indicators derived from monthly surveys of private sector companies. They provide insights into the economic trends in the manufacturing and service sectors, reflecting the level of business conditions such as employment, new orders, and inventory levels. In the video, PMIs are highlighted as critical macro data that could influence investors' decisions, signaling the health of the economic cycle and potentially affecting market sentiment.
πŸ’‘Jobs Report
The Jobs Report, or employment report, is a monthly report issued by the United States Bureau of Labor Statistics and includes key employment data such as the number of jobs added to the economy and the unemployment rate. In the video, the Jobs Report is mentioned as a major focal point for investors, providing insights into the labor market's health and trends, which can influence Federal Reserve decisions and market dynamics.
πŸ’‘FED Rate Decision
The FED Rate Decision refers to the Federal Reserve's action on interest rates, which can impact borrowing costs, consumer spending, and overall economic activity. The video discusses investors bracing for the latest rate decision from the FED, which is critical as it influences financial conditions and can have significant implications for the stock market and the broader economy.
πŸ’‘Recession Indicators
Recession indicators include economic signals that suggest an economy might be heading towards a recession, such as declining employment, reduced manufacturing activity, and lower consumer spending. In the video, certain trends, like the decline in weekly hours and a shift towards more part-time jobs, are discussed as recessionary signs, indicating potential economic slowdowns.
πŸ’‘Temporary Employment
Temporary employment refers to positions that are not permanent and usually have a set end date. The video mentions a decline in temporary employment levels by 10%, viewing it as a leading indicator of employment trends and a possible sign of economic downturn, reflecting businesses' hesitation to commit to long-term hires in uncertain economic times.
πŸ’‘Inflation Fight
The 'Inflation Fight' describes efforts, particularly by the Federal Reserve, to manage and reduce inflation to a target level, often through monetary policy adjustments including interest rate changes. The video discusses the current status of this fight, with the goal of returning inflation to a 2% level, and the challenges posed by external factors such as supply chain disruptions.
πŸ’‘Supply Chain Issues
Supply chain issues involve disruptions in the production and distribution networks that can lead to delays, increased costs, and inflation. The video raises concerns about supply chain problems, especially in the Red Sea, potentially impacting inflation rates and complicating the Federal Reserve's efforts to control inflation.
πŸ’‘Tech Layoffs
Tech layoffs refer to job cuts within the technology sector, often resulting from economic downturns, cost-cutting measures, or restructuring efforts. The video discusses how tech layoffs and other sectoral job losses might eventually reflect in employment data, affecting overall job market resilience and potentially influencing Federal Reserve policies.
πŸ’‘GDP Print
A GDP Print refers to the release of Gross Domestic Product data, indicating the total value of all goods and services produced over a specific time period. The video mentions the GDP print as a critical headline number, which can influence business confidence and investment decisions, especially among small and medium-sized enterprises.
πŸ’‘Global Inflation Cycle
The Global Inflation Cycle refers to the fluctuating phases of rising and falling inflation rates worldwide, influenced by various factors including supply and demand dynamics, monetary policies, and external shocks. The video speculates about inflation trends, suggesting that global inflationary pressures might begin to rise again, posing challenges for the Federal Reserve's inflation targeting efforts.
Highlights

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Transcripts
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