REPLAY | Employment Conference Call | Can the Labor Market Keep “It” (the Economy) Up? – 1/5/24

Posted January 7, 2024 by rvillareal

Can the Labor Market Keep “It” (the Economy) Up?

A superstrong Labor Market in 2023 was largely responsible for the surprisingly strong U.S. economy; which, in turn, increased demands for an increasing supply of labor, in a kind of “positive feedback loop” that produced bottom-line—1) strong real economic growth for the year, now estimated at 2.9%; 2) a still high from the Federal Reserve’s point-of-view but lately sharply diminishing inflation rate; 3) a more-than-fully employed Labor Market for some 25 months now; and 4) only a growth recession in earnings with company profit margins on the S&P 500 quite high relative to history.

This result, particularly for the economy, Jobs and Persons Working perhaps was the big surprise of 2023, at the beginning of which almost unanimous opinion and forecasts of a coming Recession (not the Decision Economics, Inc. forecast).

In retrospect, the strength of the jobs market, rising consumer real income, and late in-the-year some increased consumer confidence principally were responsible for strong Aggregate Household Consumption, at 2.6% for the year, about 70% of Real GDP, and a way-above-trend real economy growth rate.

Can the Jobs Market Keep “It” Up—that is, its strength as the principal driver of “It,” i.e., the economy and earnings?

This is one of the $64 questions for 2024, along with the economic and inflation outlook, Federal Reserve monetary policy, whether No Recession, a Soft Landing or Recession, earnings, market interest rates, dollar and the stock market.

The Washington Election and Wartime footing of Geopolitics uncertainties are other big issues, non-economic in nature but if any External Shocks sure to reverberate on the economy and financial markets.

Conference Call Outline

• Household Survey Persons Working—More Accurate?
  • New Dimensions in the Labor Market—Working-at-Home; New Business Formation; Small Businesses; “Gig” Workers; Self-Employed
• Financial Markets—Trend Bullish Stocks; Neutral/Negative Fixed Income; Neutral to Bullish U.S. Dollar
• Equity Market—S&P 500 Op. EPS Estimates, Multiples, Fair Value Ranges
  • 4500 to 5100 the Now New Fair Value Range—New High to-Come
  • Interest Rates—Lot of Volatility
  • Dollar
  • Equity Market—P/E Range Wide
  • Earnings the Main Driver for Equities