Payroll growth looks to have slowed to about 250K in July, continuing the slowing trend.
The Q2 employment costs index should show that wage growth has softened markedly.
GDP growth likely will rebound in Q3, but final demand will be weak; that matters more to the Fed.
Ian Shepherdson (Chief Economist and Founder)U.S.
The Homebase data and an array of surveys suggest that job growth has slowed; we look for 250K.
The softening in average hourly earnings growth looks real, given the surge in prime-age participation.
Google mobility data point to a clear rebound in the ISM services index, but that guarantees nothing.
Ian Shepherdson (Chief Economist and Founder)U.S.
The drop in May auto sales is a blip; the recovery in production will support rising sales through year-end.
The uptick in the ISM manufacturing index can’t be sustained, but overall the sector is in decent shape.
Don’t bother with the ADP employment report today; it is an unreliable guide to payrolls.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The surge in inflation is largely a margin story; costs have jumped too, but margins are the bigger factor.
- Absent structural change in markets, margins will mean-revert, pulling inflation down, but how quickly?
- The Empire State survey looks primed for a correction after the inexplicably strong April reading.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Existing home sales probably fell in January, but this it not the start of the hit from higher rates.
- The Philly Fed suggests that manufacturing growth is slowing, and supply pressures are easing.
- The index of leading indicators is set to surprise massively to the downside today, thanks to Omicron.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Markets are becoming too aggressive on the likely pace of Fed tightening this year...
- ...But they aren't aggressive enough on the question of the terminal rate, given rising productivity growth.
- They won't start to talk about rising r-star until much later this year, once the current inflation spike is over.
Ian Shepherdson (Chief Economist and Founder)U.S.
- No break yet in the run of hefty core CPI increases, but vehicle prices are about to start heading south...
- The new high for the headline rate will increase the political/media pressure on the Fed still further...
- ...The risk of a 50bp hike in March has increased, but we still think 25bp is more likely.
Ian Shepherdson (Chief Economist and Founder)U.S.
- January's ADP employment number today is a wild card, thanks to the Omicron Covid hit.
- Excess labor demand is no longer rising, but it has not yet started to fall.
- Supply chain pressures are easing, but normalcy is still some way off.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The ISM index likely dipped in January, but a big Omicron hit seems to have been averted.
- The construction recovery has been driven entirely by housing, but the story is changing…
- …Industrial and commercial construction is rebounding strongly, but housing activity is set to drop.
Ian Shepherdson (Chief Economist and Founder)U.S.
- We expect zero GDP growth in the first quarter, thanks to Omicron, but inflation will hit new highs.
- The Fed will hike, but 50bp would be a big stretch after back-to-back declines in payrolls.
- By the time growth rebounds in the second quarter, inflation will be falling sharply.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The Fed is unlikely to announce any decisions on balance sheet run-off today;
- Rates still have to rise, with March the most likely date for lift-off, but the Fed can afford to wait for QT.
- Upside risk for December new home sales, after a run of undershoots compared to mortgage applications.
Ian Shepherdson (Chief Economist and Founder)U.S.
- December's grim retail sales report likely will be followed by further weakness in January...
- Spending has been hit, temporarily, by a one-two punch from early holiday shopping, then Omicron.
- The Fed is dead set on starting to tighten soon, but the upcoming data should dampen Q2 expectations.
Ian Shepherdson (Chief Economist and Founder)U.S.
