WealthVest

View Original

Powell Wants to Cut. Data Says Not So Fast

Jay Powell is worried about the job market. For good reason as the employment data that have been traditionally forward looking have been weak for a while now.  The temporary labor measures have been terrible for more than a year.  Temps had always been considered the most reliable of historical early warning signs but a bust of an indicator so far this time.  The Household Survey, from which the unemployment rate is derived, has been far weaker than the Nonfarm Payrolls for well over a year.  We stand on the verge of breaking through “The Sahm Rule” which states that if the unemployment rate (rolling average) rises by 50 bps from the trough, a recession looms. Job openings peaked over two years ago, and so on.

But here we are with Initial Jobless Claims rolling along at very low levels.  Not only that, but there are indications that employment may be firming.  As we learned from today’s “JOLTS”, job openings have levelled out, quit rates stopped falling (quits are a sign of labor market confidence) and have been flat since November ’23. Hirings are on the rise again.  Earlier this week, we saw a manufacturing ISM above 50 for the first time in almost a year and a half, suggesting that the most cyclical parts of the economy are not only holding up but perhaps even getting stronger. 

Away from employment, the recent uptick in CPI and PCE measures, as well as commodity indexes approaching two-year highs and oil at $85 compound the concerns that cutting would be a mistake.  The Fed does not want to create a situation where they cut and long rates move sharply higher, which is a distinct possibility if market participants smell a Fed unwilling to fulfill their “price stability mandate”.

WealthVest makes no representation or warranty, expressed or implied, with respect to the accuracy, reasonableness, or completeness of any of the statements made in this material, including, but not limited to, statements obtained from third parties. Opinions, estimates and projections constitute the current judgment of Tim as of the date indicated. They do not necessarily reflect the views and opinions of WealthVest and are subject to change at any time without notice. WealthVest does not have any responsibility to update this material to account for such changes. There can be no assurance that any trends discussed during this material will continue.

Statements made in this material are not intended to provide, and should not be relied upon for, accounting, legal or tax advice and do not constitute an investment recommendation or investment advice. Investors should make an independent investigation of the information discussed in this material, including consulting their tax, legal, accounting or other advisors about such information. WealthVest does not act for you and is not responsible for providing you with the protections afforded to its clients. This material does not constitute an offer to sell, or the solicitation of an offer to buy, any security, product or service, including interest in any investment product or fund or account managed or advised by WealthVest.

Certain statements made in this material may be “forward-looking” in nature. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking information. As such, undue reliance should not be placed on such statements. Forward-looking statements may be identified by the use of terminology including, but not limited to, “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology.

The S&P 500® is a trademark of Standard & Poor’s Financial Services, LLC and its affiliates and for certain fixed index annuity contracts is licensed for use by the insurance company producer, and the related products are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC or their affiliates, none of which make any representation regarding the advisability of purchasing such a product. WealthVest is not affiliated with, nor does it have a direct business relationship with Standard & Poors Financial Services, LLC.