Weather hit to claims reverses; Philly Fed is much weakter than it looks
Kieran Clancy (U.S. Economist)U.S.
Housing starts close to a floor; conflicting signals from the regional Fed surveys
Kieran Clancy (U.S. Economist)U.S.
Philly Fed stabilizing, maybe; claims don't tell the whole labor market story
Kieran Clancy (U.S. Economist)U.S.
- A third straight benign core CPI print for December would complete the best streak in two years.
- Look out for falling vehicle prices and airline fares, and—perhaps—slower rent increases.
- Jobless claims likely stayed low last week, but rising layoff announcement signal trouble ahead.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Our base case remains that inflation will be van- quished without a recession...
- ...But the Fed’s determination to take zero inflation risk makes the balancing act much more difficult.
- Core inflation is now falling, but the Fed wants wage growth to moderate; leading indicators are favorable.
Ian Shepherdson (Chief Economist and Founder)U.S.
Mixed industrial surveys; don't believe the drop in claims
Kieran Clancy (U.S. Economist)U.S.
- Layoff announcements are not a reliable guide to jobless claims in the short term...
- ...But we cannot ignore the upward trend in recent months; claims likely will follow.
- Regional Fed surveys point to a sharp slowdown in capital spending, but it is not in the hard data yet.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Much of the sharp slowing in the October core CPI looks sustainable, including rents.
- The Fed is still most likely to hike by 50bp in December, but 25bp is possible…
- …All eyes on the November employment and CPI reports, both due before the December FOMC.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Job growth is slowing, on track to slip below 100K by next March, pushing up unemployment.
- Wage growth appears to be softening, though the data are not quite definitive, yet.
- If recent trends continue, and core CPI prints moder- ate, Chair Powell’s stance will have to change.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Chair Powell wants slower growth, better core inflation, and a looser labor market before the Fed pivots...
- ...Those criteria have not yet been met, despite better pipeline inflation, so expect no change in tone today.
- We now expect a 175K increase in October payrolls; a slowdown, but not a rollover.
Ian Shepherdson (Chief Economist and Founder)U.S.
- If core inflation and wage growth slow simultaneously, the Fed’s last hike will be in December
- Don’t be deceived by low and stable initial claims; labor demand is slowing markedly.
- The latest core CPI prints are grim, but recency bias is dangerous; change is coming, for the better
Ian Shepherdson (Chief Economist and Founder)U.S.
- Recessions are proportional to the prior imbalances, and right now the private sector is in good shape…
- …A brief over-reaction to the extent of the Fed’s tightening is possible; a deep recession is unlikely.
- Hints of a pivot played well in markets last week, but the Fed needs better data, soon.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The drop in productivity across the past three quarters is a reversal of the initial Covid-driven surge…
- …The trend in productivity is not falling; expect a rebound to begin in Q3.
- Positive productivity growth and slowing wage gains next year will allow the Fed to stop hiking, then ease.
Ian Shepherdson (Chief Economist and Founder)U.S.
In one line: Philly Fed disappointing but not definitive; trend in claims still below 220K
Ian Shepherdson (Chief Economist and Founder)U.S.
- Monetary policy soon will be very restrictive, if it isn’t already, but the Fed will tighten further.
- The risk of a recession in the first half of 2023 has increased markedly…
- …So we now expect the Fed to ease by 75bp in the second half of next year.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The September core CPI likely was much less scary than in August, but the Fed wants a run of good data.
- Wildcards for September are vehicle prices, airline fares, and the components which spiked in August…
- …The range of plausible numbers is wide; it’s impossible to make monthly forecasts with confidence.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Markets overreacted to an insignificant dip in unem- ployment because the Fed overreacts to the data too.
- The slowing in job growth has been very gradual in recent months, but friendly seasonals can’t last.
- The slowing in wage gains still looks more like a sta- tistical quirk than a trend, but October data are key.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The sudden and dramatic plunge in the August job openings will move the Fed, if it persists...
- ...Similar reports for the next two months make 125bp of tightening by year-end very unlikely.
- The ISM services index likely dipped in September; the housing collapse and falling stock prices hurt.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Businesses’ capex plans appear to be starting to rebound, but how much damage has been done?
- Cheaper gas likely is cheering consumers, and reducing their inflation expectations.
- New home sales probably fell again in August, and prices probably are falling, given very high inventory.
Ian Shepherdson (Chief Economist and Founder)U.S.
