A chief economist who called the 2008 recession shares 5 charts that show the labor market
[ad_1]
One of the big surprises of the Federal Reserve’s record hiking cycle over the last couple of years has been the strength of the labor market. Month after month, the US economy has steadily added jobs, and the unemployment rate has remained below 4%.
But all of that looks likely to change in the months ahead, according to Ian Shepherdson, the founder and chief economist of Pantheon Macroeconomics. Shepherdson said in 2005 that a bubble in the US housing market would send the economy into recession, a scenario that came to fruition over the following few years after the housing market began to unravel in 2006. More recently, Shepherdson said a recession would unfold in 2023, which did not happen.
In a note to clients on Monday, Shepherdson said various parts of the US economy are set to weaken over the coming months, including the labor market.
“For the first time in this cycle, an array of indicators point tentatively to a meaningful slowdown in economic growth, driven by the consumer, and a clear weakening in the labor market, as soon as the second quarter,” Shepherdson said.
“None of these numbers are yet definitive, and we need to see another couple months of soft retail sales, depressed hiring indicators, and evidence of rising layoffs, before we can be sure that growth will slow to the point where last year’s upside surprises seem like ancient history,” he continued. “But the risk is greater now than at any point since the post-Covid rebound, and we would be surprised if a real shift has not emerged in the data by the summer.”
Right now, markets are pricing in three 25-basis-point rate cuts from the Fed in 2024. But Shepherdson said that number is more likely to be five if his read on the data is correct. In 2025, the central bank will have to cut an additional four times, he said.
“Nothing changes the minds of policymakers—and investors—faster than a sustained softening in payrolls, so if the leading indicators are right, the tone of Fed missives will be very different by the summer, and markets will be pushing for more aggressive rate cuts,” Shepherdson said.
In the note, Shepherdson included a number of charts backing up his view that the economy is set to weaken. Below, we’ve compiled five of them focused on the labor market.
[ad_2]
This article was originally published by a www.businessinsider.com . Read the Original article here. .