REPLAY | Monthly | Employment Conference Call | Early Summer Labor Market—Still Supertight or Rebalancing? – 7/7/23

Posted July 9, 2023 by rvillareal

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Early Summer Labor Market—Still Supertight or Rebalancing? Fed in a New Shift! “Soft Landing” and “Recession” Odds Change. Markets.

• Labor Market Pre-Summer (Jun.) Employment Report
  • Data—Jobs (Headline Nonfarm Payrolls, Cos.); Hh. Survey (Persons Working, Unemployment Rate); Labor Supply (Labor Force Participation Rate (LFPR), Employment/Population Ratio); Wage Inflation—Average Hourly Earnings (AHE)
  • Tight Labor Market Still?  Weakening?
• Economy—“Scent” of a “Soft Landing” More Noticeable, “Recession” Odds Down
  • DE Basic Prospect Soft Landing (60% Odds, 55% Before)
  • Economy—That “Recession?” (30% Odds, Down From 35%)—Inflation, Financial Fallout Main Risks
• Notable “New” Fed Shift, Rate Path a Little Higher, Long-Lived, Moderating and Spacing Lower Dosage Tightenings—Fundamental and Correct!
  • FedSpeak—Surprisingly Resilient Economy; Labor Market Surprisingly Tight; Inflation Diminishing but Stubbornly High—More Work Needed for 2%
  • Decision Economics, Inc. (DE)Speak—Soft Landing; Supertight Labor Market Fully Employed; Entrenched- and Sticky-High Inflation
  • Central Banks—Similar Situations Generally
• Markets—Interest Rates
  • Another 25 bps Fed Funds Rate near End-July; 25 bps Beginning-November
  • Inverted Yield Curve Stays
• Dollar Strength on U.S. Growth and Rates—Especially vs. Yen and Yuan
  • Japan Odd Man Out
  • Europe, U.K. Raising Rates
• Equity Bull Market But “Soft”
  • S&P 500 Op EPS “Mild” Earnings Recession in 2022-23 and Upturn in 2024, 2025
  • New Fair Value Ranges—3900 to 4600 for the S&P 500; Midpoint Fair Value, 4250