A week later, Jackson Hole Economics (finally) meets Jerome Powell’s demands They are like orders. The landing is coming out with a very encouraging steady line from end of 2022. Glide without rubbing shoulders. It did not stomp on recession or stagnation as feared. However, different paces of adjustment in the real economy and inflation are changing the yellow light on the dashboard. Inflation, a priority from 2022, is falling faster than activity and employment. But Pavel was not satisfied. In short: The economy grows with more pretensions and prices can be fueled. Therefore, Jackson Hole fusion, The fare hike is not over. And it may not be one hike but several, said Boston Peter’s Susan Collins. Or nothing if the stars align. as? If activity and employment moderate -in addition to inflation- and turn off the warning light. Later, if productivity makes a strong impression, you can be less restrictive and not take risks.
What new element is common in the most recent battery of indicators? For the first time, you can clearly see the balanced peace that Powell & Chia was looking for. The U.S. created 187,000 net new jobs in August. The average for the previous twelve months was 271 thousand. The year started with 472 thousand (initially reported as 517 thousand).
Job creation machine works fine but no longer piece work. It is not taken to extremes. All data undergoes constant revisions and is invariably downwards. June and July Mocha 110 thousand positions. The concept of overheating is exaggerated. The unemployment rate rose from three-tenths to 3.8%. This is the lowest level and the highest since the central bank started raising rates (from 0.25% to 5.50%) in March 2022. This brings Pochin closer to the definition of full employment that the central bank uses in its models (not). still reached): 4%.
What’s good in the news? This is fully explained by the increase in labor force participation. What happened to the mass exodus of workers that caused the pandemic and immobilized? The contribution of the age group between 25 and 54 years is increasing and is highest. Conclusion: Labor supply is less difficult than feared. Also, according to the JOLTS report, Demand for labor decreases month by month (From a height never seen before). A total of 8.8 million searches (in steady decline from a record of over 12 million in March 2022) which reduces the need for surplus labour. From a salary pressure point of view, decompression is the norm. The quarterly moving average rose 4.5% in August, up from 4.9% a month earlier, and further away from the 6.4% in January 2022. What does Powell expect? Progress is visible. He would say yes, more is needed. With an oil-fueled trend and positive (and rising) real interest rates, it is not clear that he will abandon his hands-off strategy and call for his intervention.
Inflation is high, Powell Dixit at Jackson Hole. However, the improvement is noticeable. This was confirmed by the central bank’s preferred measure.The personal consumption deflator recorded a year-on-year variation of 3.3% in August, up from 3% in July. But this boom was due to a sudden fall in prices in July 2022. The monthly change in average, median and core inflation was 0.2% in both June and July.
Inflation was 2.6% in the last twelve months. The central bank wants to return to the 2% target after 2025. Economic activity also moderated according to the latest PMI report for industry and services. All previous data pointed to uncomfortable warming. It was this information that brought about a ceasefire in the long war. After establishing a new high of 4.36%, the 10-year rate quickly fell more than 20 basis points. It rose to 4.18% on Friday, showing no signs of fresh firing. Moderation is key to ending the rise in long rates, but also ending the short-rate war waged by the central bank, and hence the rise in the stock market. There is no rush in the rally. September is a slippery slope. With a soft landing at the head of the runway, the clock is on your side and you can choose the best moment to recharge.
