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- Macro Monday: Beware Of Falling Wage Growth
Macro Monday: Beware Of Falling Wage Growth
The Macro Institute's Weekly Economic Primer
The Macro Institute
May 06, 2024
With a third of 2024 now in the books, it’s fair to say that the major shift from 2023 has been investor perception that sticky inflation will remain a problem for central banks longer than anticipated. This has caused interest rates to rebound and market leadership to shift from Growth to a combination of Value and Defensives. In his presser last Wednesday, Fed Chair Jerome Powell continued to sound optimistic that inflation will moderate further, but he sounded less certain than he did at the end of last year. Our chart this week shows that based on the four new bits of information we received last week, the Fed should not be particularly concerned about tight labor markets preventing inflation from falling further. Hiring has slowed, but layoffs remain rare and fewer workers are finding it attractive to seek greener pastures. Absent a supply shock to a commodity like oil, it’s hard to maintain high price inflation when wage inflation is falling because of how closely tied consumer spending is to incomes. In our opinion, the Fed may soon come to regret waiting longer to reduce interest rates, especially if unemployment resumes its rise in the coming months.
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Top Tweets From The Macro Institute
We are currently witnessing the second longest plateau in the Fed Funds Rate in modern history. The only one longer was in the run up to the GFC. Several Fed officials have admitted that, with hindsight, they wished they would have provided stimulus a lot earlier at the time.
— Francois Trahan, M²SD (@FrancoisTrahan)
May 4, 2024
Expecting college or MBA interns in a few weeks? Do you have new hires on your team?
We're hosting a virtual event designed specifically for them! Allow us to enrich their morning on June 12th with exclusive top-down macro analysis tools they won't learn anywhere else.
— The Macro Institute (@MacroInstitute)
May 2, 2024
Time will tell where the unemployment rate tops out for the cycle, but odds are that this will not happen for a while. It generally takes about two years for a change in the Fed Funds Rate to be reflected in employment. It seems clear that the story is just beginning.
— Francois Trahan, M²SD (@FrancoisTrahan)
May 3, 2024
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