- We think total payrolls rose by about 225K in January, comprising 175K private and 50K government.
- Similar gains are likely through the end of Q1, but we expect a meaningful slowing in job gains in Q2.
- Don’t worry about the jump in ISM prices paid; it’s an unreliable guide to CPI core goods prices.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The Fed wants to see confirmation of its base-case forecast that inflation is headed to target…
- …If the data before March are favorable, the first ratecut will come at that meeting, but no guarantees.
- The ISM manufacturing survey likely will show that the industrial economy is still in a hole.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The Fed probably will abandon the idea of further hikes today, but won’t commit to easing timing.
- The Q4 employment costs index today is key; a further slowing would make a March easing more likely.
- The jump in December job openings is noise; the falling quits rate is much more important.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We’re much more interested in the JOLTS quits rate than the headline job openings number…
- …Surging quits warned of the 21-to-22 jump in wage gains; the signal now is to the downside.
- Soaring stocks and cheaper gas are boosting consumers’ sentiment; will spending follow?
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The excellent Q4 inflation numbers are much more important than the overshoot in Q4 GDP growth.
- The core PCE deflator likely rose 0.2% in December, but 0.1% is much more likely than 0.3%.
- Pending home sales probably rebounded strongly in December, with further gains ahead.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We see downside risks for Q4 GDP growth, but the uncertainties over inventories and trade are great.
- The core PCE deflator likely rose at a 2.0% annualized rate for the second straight quarter.
- December’s durable goods orders likely flattered by aircraft; new home sales probably rebounded.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Housing market activity looks primed for a rebound this year, but no return to Covid-boom levels.
- Residential construction will provide a small boost to overall growth, partly offsetting weakness elsewhere.
- The upturn in existing home prices requires more supply, which means prices will flatline, at best.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Risks to Thursday’s Q4 GDP print are mostly to the downside, but trade and inventories are wildcards.
- Solid consumption propelled final demand, offsetting sluggish business capex and flat housing spending.
- The core PCE deflator probably rose at a 2.0% annualized rate, for the second straight quarter.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The House likely will vote to prevent a government shutdown today, but no real progress on spending.
- Governor Waller doesn’t know how the CPI revisions will play out, they’re as likely to be good as bad.
- Existing home sales likely little changed in December, but consumers’ confidence is improving.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The December retail sales report was much stronger than expected, and revisions were minimal.
- We now think real consumption spending rose at a 2.6% annualized rate in the fourth quarter.
- The Fed would prefer softer numbers, but what really matters to policymakers is the inflation picture.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Both our Homebase-driven model and the NFIB survey signal about 225K payrolls in January.
- Plunging manufacturing hours worked signals down- side risk for December core retail sales.
- Manufacturing is still struggling; no sign yet of a meaningful improvement.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- December’s PPI and CPI data signal a mere 0.15% increase in the core PCE deflator...
- ...That would complete the second straight 2.0% annualized quarterly gain in the core PCE deflator.
- Look for a rebound in the January Empire State index, but these data are wild.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Unsustainable gains in used auto prices, airline fares, and rents explain the solid December core CPI…
- …But core PCE matters much more to the Fed, and it likely rose by much less than the core CPI.
- Further downward pressure on core PPI inflation requires falling margins, and/or slower wage growth.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The core CPI likely rose by an unthreatening 0.2% in December, but the net risk is to the upside.
- Rents, airline fares, and used auto prices all pose threats to our forecast for the core.
- The big picture, though, is that core inflation is slowing across most core goods and services.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The topline spending deal means that fiscal policy will be a very modest tailwind for 2024 economic growth.
- The risk of government shutdowns has not gone entirely, but it is greatly diminished.
- Watch the NFIB details, not the headline, which is very sensitive to the stock market.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The surge in stock prices is lifting small business sentiment, but the hard activity numbers are weaker.
- Inventories look set to be a big drag on Q4 GDP growth, but the extent of the hit is very uncertain.
- November’s surge in revolving credit use could just be noise, but another big gain will signal distress.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Homebase signals December payroll growth of about 225K; no sign of further weakening yet.
- That said, a disproportionate share of this increase likely will come from healthcare and education jobs.
- The ISM services index likely ticked higher in December, but a steady softening in 2024 is a decent bet.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Jobless claims will be wild over the next few weeks; the underlying trend won’t emerge until mid-January.
- Leading indicators of claims are mixed, but claims are more likely to rise than fall over the next few months.
- The ADP is a deeply unreliable guide to the official payroll numbers; we recommend you ignore it.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The December ISM manufacturing index likely fell, leaving it broadly in line with the cycle low…
- …But falling interest rates likely will lift capital spending and manufacturing activity in 2024.
- The Fed minutes are unlikely to reveal anything new, but we continue to expect rate cuts as early as March.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We think the core PCE deflator rose by only 0.11% in November; the trend is slowing sharply.
- Consumers’ spending is still rising, but the rate of growth is moderating after the Q3 jump.
- Aircraft and autos likely lifted November orders, but expect a soft core.
Ian Shepherdson (Chief Economist, Chairman and Founder)US