The economic data released during the holiday-shortened week are consistent with our view that U.S. economic growth remained firmly in positive territory during the final quarter of 2022. That noted, a modest contraction in growth beginning in mid-2023 remains our base case forecast as the lagged effects of high inflation and monetary tightening take hold.
Ongoing strength in the labor market helps corroborate our view that the economy is on a positive growth path at present. Nonfarm payrolls rose by a solid 223K during December, a slight downshift from the 256K gain posted in November. Despite the slight moderation, the job-gain easily beat market expectations. The nonfarm payroll gain was in line with the ADP employment report for December, which showed a 235K gain. Despite the sturdy pace of hiring during the month, job growth appears to be moderating from the robust rate seen in the first half of 2022.
A decline in the unemployment rate to 3.5% in December from 3.6% the month prior is another reminder that the labor market remains tight. A rise in the labor force participation rate during December is an encouraging sign that labor supply is improving. Alongside the uptick in labor force participation, average hourly earnings moderated to 0.3% during the month, a softer gain than the downwardly revised 0.4% monthly increase in November. The moderation in earnings is at least one sign that wage growth is cooling. Still, average hourly earnings are running at a 4.1% annualized pace over the past three months, which is still well above what the Fed believes would be consistent with sustained 2% inflation. All told, this report does little to alter our view that the FOMC will remain in tightening mode when it concludes its first meeting of 2023 on February 1. As we write in the Interest Rate Watch, the FOMC minutes for December's meeting revealed that a monetary pivot is not likely imminent, as inflation remains hot and employment growth remains strong.
A modest drop in job openings is another sign that, while softening, labor demand remains relatively strong currently. The Job Openings and Labor Turnover Survey (JOLTS) revealed that the count of job vacancies fell to 10.46 million in November from 10.51 million in October, a smaller decline than consensus estimates. Chair Powell has hinted on several occasions that the vacancy-to-unemployed ratio, which remained highly elevated in November, needs to come down in order to ease wage pressures and reduce overall inflation.
This Week's State Of The Economy - What Is Ahead? - 04 March 2022
Wells Fargo Economics & Financial Report / Mar 08, 2022
February\'s employment data showed the economy had strong momentum, but that seems pretty dated now with Russia\'s invasion of Ukraine and the Fed\'s shift to a more hawkish tone on monetary policy.
This Week's State Of The Economy - What Is Ahead? - 23 September 2020
Wells Fargo Economics & Financial Report / Sep 22, 2020
European activity is surging. Germany and Italy are leading the way, but France is close behind despite an ongoing rise in cases. The Google data are a bit outdated, but are hard to reconcile with today’s weak Eurozone services PMI figures.
This Week's State Of The Economy - What Is Ahead? - 04 June 2021
Wells Fargo Economics & Financial Report / Jun 08, 2021
The CDC\'s relaxation of its mask mandate occurred mid-May, and as data for that month begins rolling in this week, it is evident there is no lack of demand. Supplies, on the other hand, are a worsening problem.
This Week's State Of The Economy - What Is Ahead? - 03 March 2023
Wells Fargo Economics & Financial Report / Mar 07, 2023
Looking at Q4 GDP, Australia\'s economy grew by less than expected, GDP was flat for the quarter in both Canada and Switzerland, and Sweden\'s economy contracted in the final quarter of last year.
This Week's State Of The Economy - What Is Ahead? - 22 May 2020
Wells Fargo Economics & Financial Report / May 25, 2020
The re-opening of the country is getting underway, with all 50 states starting to roll back restrictions.
This Week's State Of The Economy - What Is Ahead? - 04 December 2020
Wells Fargo Economics & Financial Report / Dec 09, 2020
Manufacturing held up relatively well in November, despite a larger-than-expected dip in the ISM manufacturing survey. The nonfarm manufacturing survey rose slightly.
This Week's State Of The Economy - What Is Ahead? - 23 April 2021
Wells Fargo Economics & Financial Report / Apr 26, 2021
This week\'s lighter economic calendar allowed forecasters more time to assess the implications from the prior week\'s blowout retail sales report.
This Week's State Of The Economy - What Is Ahead? - 07 August 2020
Wells Fargo Economics & Financial Report / Aug 11, 2020
There were more signs of global recovery this week and PMI surveys improved further across the world.
This Week's State Of The Economy - What Is Ahead? - 19 June 2020
Wells Fargo Economics & Financial Report / Jun 22, 2020
Retail sales kicked off the week with a bang, rising 17.7% month-over-month in May. The increase was larger than every single one of the 74 forecast submissions.
This Week's State Of The Economy - What Is Ahead? - 10 November 2020
Wells Fargo Economics & Financial Report / Nov 17, 2020
The U.S. election has come and gone, but we have not made any meaningful changes to our economic outlook, which continues to look for further expansion in the U.S. economy in coming quarters.
