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? - 24 July 2020
Wells Fargo Economics & Financial Report / Jul 25, 2020
Initial jobless claims rose to just over 1.4 million for the week ending July 18. Continuing claims fell to about 16.2 million. Initial claims edging higher suggests that the resurgence of COVID-19 may be taking a toll on the labor market recovery.
This Week's State Of The Economy - What Is Ahead? - 17 December 2021
Wells Fargo Economics & Financial Report / Dec 21, 2021
7 Interest Rate Watch for more detail. In other news, retail sales data disappointed as higher prices factor into spending and industrial activity continued to recover but remains beset by supply issues.
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? - 24 February 2023
Wells Fargo Economics & Financial Report / Feb 28, 2023
Existing home sales declined 0.7% in January, while new home sales leaped 7.2%. Real personal spending shot higher in January, and solid growth in discretionary spending suggests continued consumer resilience.
This Week's State Of The Economy - What Is Ahead? - 22 April 2022
Wells Fargo Economics & Financial Report / Apr 27, 2022
I’ll wish you a Happy Earth Day anyway. Don’t expect a card this year. While the Earth continues to thankfully revolve at a steady rate, rising mortgage rates appear to be slowing residential activity
This Week's State Of The Economy - What Is Ahead? - 15 December 2023
Wells Fargo Economics & Financial Report / Dec 21, 2023
core CPI remained elevated in November at a 4.0% annual rate, a string of slower monthly prints suggests that disinflation has more room to run.
This Week's State Of The Economy - What Is Ahead? - 21 February 2020
Wells Fargo Economics & Financial Report / Feb 22, 2020
Minutes from the January 28-29 FOMC meeting indicate the coronavirus will not push the Fed to cut interest rates, and for the most part housing and manufacturing survey data this week supported that view.
This Week's State Of The Economy - What Is Ahead? - 01 March 2024
Wells Fargo Economics & Financial Report / Mar 05, 2024
Economic data were downbeat this week, as downward revisions took some of the shine out of the marquee headline numbers. Despite the somewhat weak start to Q1, economic growth continues to trek along.
This Week's State Of The Economy - What Is Ahead? - 08 January 2021
Wells Fargo Economics & Financial Report / Jan 12, 2021
The manufacturing sector is showing a great deal of resilience, with the ISM Manufacturing survey exceeding expectations, at 60.7, and factory orders remaining strong.
This Week's State Of The Economy - What Is Ahead? - 11 June 2021
Wells Fargo Economics & Financial Report / Jun 26, 2021
Okay, so I’ve gotten about half a dozen calls since Wednesday asking if I saw the May CPI numbers that came out this week.
