ADP is too unreliable to take seriously, though it’s consistent with our payroll forecast.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The spike in the core PCE deflator is over, but Fed officials will want to see more data before they relax.
- Consumers’ spending is on course for another modest 2%-ish increase in the second quarter.
- Manufacturing is in better shape than implied by the grim Chicago PMI; auto sales headed for Q2 bounce.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Methodological changes do not explain all the fall in the Michigan survey measure of consumers' confidence...
- ...Fewer people expect the Fed to ease soon, while layoff fears have grown; slower spending growth lies ahead.
- Equipment investment looks set for a weak second quarter, despite better-than-expected May orders.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
PAYROLL GROWTH IS SET TO SLOW SHARPLY…
- …THE FED WILL RESPOND, BUT WHEN?
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The lagged effect of tight credit and high rates is starting to bite; we're cutting our 2024 and 2025 forecasts.
- The small business sector is under pressure, and consumers are starting to wobble.
- Sustained slow growth will push unemployment up and inflation down; yields will drop, and stocks will struggle.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Not definitive, but consistent with the idea that the trend is starting to rise.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
A broad-based slowdown, pointing to a 0.24% core PCE print.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The birth/death model is likely to make smaller contributions to payroll growth across spring and summer.
- The wave of pandemic-inspired startups is yet to fade from the model, but the turning point is imminent.
- Consumers are becoming increasingly worried about the labor market; spending growth will slow.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
One big jump is not a trend, but a rising trend is now due
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- April's slowdown in payrolls looks like real weakness; revisions likely will push the numbers down further.
- Near-zero growth in payrolls lies ahead if the NFIB survey retains its status as the best leading indicator.
- The ISM services survey has joined the growing list of surveys showing that labor demand is weakening.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- A second Trump administration apparently has plans for the Fed; none of them are good; some are wild.
- The March rise in the core PCE deflator matched expectations; muted increases are coming in Q2.
- Strong real consumption growth in Q1 was driven partly by a falling saving rate; expect the reverse in Q2.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Last year’s strong consumption was due to rapid real income growth; the saving rate rose.
- Real income growth will be much slower this year, so if the saving rate keeps rising, spending will suffer.
- Consumption might slow gradually, but in the 2001 business cycle recession, growth lurched down.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Large fall is likely an Easter timing quirk; the trend still looks flat.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
LABOR MARKET WARNING SIGNS ARE FLASHING RED…
- …BUT CHAIR POWELL SEES NO “CRACKS”
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Too volatile to make us fear a renewed downturn in manufacturing.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
