Economic Data Tracker – 
Continued job and wage growth boost chances of soft landing

Economic Data Tracker

March 8, 2024

Our weekly view on the economy including rationale on GDP, jobs report, and Fed policy decisions. Download the entire weekly edition to view timely charts and data providing a comprehensive picture of how incoming economic data affects our economic outlook.

Trend watch

Spring break was supposed to kick into high gear this week; however, much of the U.S. is still dealing with winter weather. A massive blizzard blanketed parts of Northern California and Nevada, while the Eastern and Southeastern U.S. have been soaked by heavy rains thanks to back-to-back-to-back coastal storms. That resulted in several thousand flight delays and some cancellations, mostly midweek. Not surprisingly, air passenger counts rose an anemic 0.1% in the past week. The remaining activity-based indicators (slides 5 and 6) continued to improve from the cyclically slower year-end patterns.

What’s new this week

  • Revisions smooth monthly trend, but unemployment rate ticked upward (slide 7).
  • Job growth remains resilient – staying above the pre-pandemic trend (slide 8).
  • Wages down from their peak, remain well-above pre-pandemic pace (slide 9).
  • Job openings and hiring down in January, while quit rate back at prior trend (slide 10).
  • ISM Services expands for 14th month in a row, while prices moderate (slide 11).
  • S&P Global’s Services revised upward, composite climbing (slide 12).
  • 2024 U.S. economy – still expect growth stepdown but bumping up our outlook (slide 13). 

Our take

February brought yet another solid jobs report, though the sizable downward revisions to the headline job growth distract from that fact. From our standpoint, the revisions essentially smooth the trend but don’t substantially alter it. Case in point, the U.S. economy is still creating roughly 50,000 more jobs per month compared to the pre-pandemic pace.

The combination of more Americans with jobs and higher wages – coupled with cooler inflation generally – goes a long way to bolster consumer finances. It is among the biggest reasons why the U.S. has continued to sidestep a recession.

It was reinforced by the ISM and S&P Global services indices, both of which suggest continued expansion by the services side of the economy. That’s critically important insofar as consumer services account for about 45% of the overall economy.

Accordingly, we have bumped up our growth outlook for this year (slide 13). Our base case is that the U.S. economy can avoid a recession, but avoiding a recession isn’t stronger growth. In fact, it is a stepdown in growth from last year. Specifically, we anticipate 1.7% year-over-year growth for gross domestic product (GDP) in 2024, which is below the pre-pandemic pace of 2.4% and the 2.5% growth last year.

Moreover, the reasons for slower growth remain in place – tight monetary policy, elevated borrowing costs, and slower activity (lower unit growth) – and still pose risks to the economy. Those reasons are why recession risks are still higher than an average year. Furthermore, the global backdrop is challenged by sputtering growth, particularly in Europe. Lastly, slower growth means that the U.S. economy is vulnerable to external shocks (think Russia-Ukraine War, an oil shock, etc.).

Looking ahead, this report likely complicates the timeline of when the Federal Reserve (Fed) will cut rates. We maintain our view that the Fed will reduce rates in the summer, which would ease financing pressures on consumers and businesses alike. Yet, simply reducing interest rates slightly wouldn’t be accommodative monetary policy. In other words, lowering the Fed funds target rate to say 5% would still be restrictive. That is much of the reason why the Fed doesn’t have to wait until inflation moves all the way down to its 2% target, along with considerable lags between when the Fed raises/lowers interest rates and when it fully impacts the economy. 

Bottom line

The U.S. economy remains resilient, as evidenced by solid consumer spending trends along with continued hiring and business investment. These up the chances of sidestepping a recession. However, the cumulative impact of higher rates will continue to slow economic growth. 

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