The advance estimate for 4Q22 US GDP came in at 2.9%. While this was a moderation from the annualised growth rate of 3.2% for 3Q22, it represented an upside surprise to consensus estimates, which had forecast growth of 2.6%. While this suggests the US economy is going OK, a deeper analysis reveals a weak underlying picture.
When do you think employment starts to drop? That’s the only piece of the macro puzzle that remains stubbornly strong. Last I checked, there was still a big gap between open jobs and jobseekers and my intuition is that jobless claims won’t markedly rise until that gap closes. Secondarily, I think that the lower oil and gas prices are keeping the economy strong, but that will reverse if oil prices rebound. Love to hear your thoughts.
Definitely most indicators point to employment markets as currently remaining strong - which is great. Unfortunately, I do expect the current aggressive tightening to change that.
I don't have a concrete forecast on when employment will start to drop, but I instead focus more on indicators that could reflect a gradual weakening - i.e. hours worked, wage growth, job openings, surveys of new orders and average workweeks.
As measured by manufacturing PMI/Fed surveys, new orders have been trending negative. The next step in the chain would be lower average workweeks/overtime, followed finally by declines in employment.
Given the current strength in the labour market, this could take many months to more materially play out, but I expect it to occur during 2023.
Regarding lower oil & gas prices, given a weak economic outlook, I expect oil prices to remain around current levels/trend lower as opposed to seeing another major surge in the short-term.
When do you think employment starts to drop? That’s the only piece of the macro puzzle that remains stubbornly strong. Last I checked, there was still a big gap between open jobs and jobseekers and my intuition is that jobless claims won’t markedly rise until that gap closes. Secondarily, I think that the lower oil and gas prices are keeping the economy strong, but that will reverse if oil prices rebound. Love to hear your thoughts.
Definitely most indicators point to employment markets as currently remaining strong - which is great. Unfortunately, I do expect the current aggressive tightening to change that.
I don't have a concrete forecast on when employment will start to drop, but I instead focus more on indicators that could reflect a gradual weakening - i.e. hours worked, wage growth, job openings, surveys of new orders and average workweeks.
As measured by manufacturing PMI/Fed surveys, new orders have been trending negative. The next step in the chain would be lower average workweeks/overtime, followed finally by declines in employment.
Given the current strength in the labour market, this could take many months to more materially play out, but I expect it to occur during 2023.
Regarding lower oil & gas prices, given a weak economic outlook, I expect oil prices to remain around current levels/trend lower as opposed to seeing another major surge in the short-term.