- 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
- 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
- Slowing wage gains, normalized supply chains, and a shrinking money supply will constrain inflation…
- …But anything can happen over periods as short as a few months, and the Fed is backward-looking.
- March core retail sales appear to have been soft, capping a sluggish first quarter.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The initial March jobs numbers were even stronger than Homebase implied, but things can change…
- ...We’re sticking to our base-case view that payroll growth will slow markedly in the second quarter.
- Monetary tightening works with long lags, and multiple indicators now point to slower hiring and rising layoffs.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- February’s subdued core PCE price data support the idea that January’s spike was a one-time fluke.
- Consumption is on track for a 2% gain in Q1, down from 3.3% in Q4, and real income growth is slowing
- A modest uptick in ISM manufacturing is a decent bet, but the sector remains weak.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The March Philly Fed and S&P surveys suggest the manufacturing sector’s downturn is over...
- ...But ongoing inventory rundowns and depressed global demand point to only modest growth ahead.
- New home sales likely rose for a third straight month in February; homebuilders will hang on to market share.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The shrinking stock of excess savings has exposed most households and small firms to the Fed’s hikes…
- Recent evidence of slowing growth is not yet definitive, but it has our attention.
- Nothing would shift market expectations of faster easing than a clear softening in payrolls; is it coming?
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The steady trend in job growth is set to take a serious turn for the worse, perhaps as soon as March.
- Soft March payrolls and two rounds of good inflation data would allow the Fed to ease in May.
- Congress has done the easy half of 2024 spending; expect more drama as the going gets tougher.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Falling hiring plans and rising layoff fears signal a clear slowdown in spring payroll growth.
- Cyclical job growth appears likely to grind to a halt, leaving only demographics boosting employment.
- The ISM remains depressed and range-bound, but it is likely to break gradually to the upside in the spring.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The AI boom is visible everywhere except in the GDP numbers, but that is about to change.
- AI spending is more likely to displace spending on opex—people—than other capex.
- New home sales likely were little changed in January, but a weather hit can’t be ruled out.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The closer we look at last week’s data, the less useful it appears to be as a guide to the future.
- The inflation picture is much better than the PPI and CPI data suggest; the Fed can relax...
- ...And the severe weather likely hurt retail sales, manufacturing output and housing starts, temporarily.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The CBO projects a substantial drop in the federal budget deficit this year; a headwind to growth.
- With households likely to slow the rundown of their pandemic savings too, weaker growth is a good bet.
- The annual CPI revisions were modest, and leave the clear downward trend in place.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Whatever really happened to payrolls in January, leading indicators point to much slower gains in Q2.
- The spike in hourly earnings likely reflects the mis-measurement of hours, not a rebound in the trend.
- The January data have killed any chance of a March Fed easing, but we still expect the first cut in May.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Consumption is on track for another solid increase in Q1, but cashflow growth is slowing…
- Spending growth likely will moderate in the spring, but a serious weakening requires rising layoffs.
- Core inflation is slowing on all fronts; faster margin compression would intensify the downward pressure.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The Fed is understandably cautious after the “transitory” mess, but its rate forecasts are too cautious.
- We expect the FOMC gradually to lower both its inflation and rate forecasts, starting in March.
- Soaring consumer sentiment, thanks to cheaper gas and rising stocks, signals continued solid spending.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The labor market is weaker than the headline December jobs numbers, but it’s hardly terrible.
- Either way, the Fed’s policy decisions will be driven more by the inflation numbers than the jobs data.
- The soft December ISM services survey is not definitive, but a repeat in January would get our attention.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The November PCE report highlights the significant downside risk to the Fed’s inflation forecast.
- The Fed eventually will have little choice to ease by more than their current forecast of 75bp this year.
- Housing and manufacturing activity are near a floor, but any recovery will be slow going.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The Fed’s forecasts imply remarkable stability in GDP growth and unemployment for the next three years…
- …They are likely to be wrong, and the risks to their numbers for next year are mostly to the downside.
- Homebuilders’ sentiment likely is rebounding as mortgage rates drop, with more to come.
Ian Shepherdson (Chief Economist, Chairman and Founder)US