I intend to keep both eyes on the jobs data
When posting last week on the LIBOR/OIS spread last week, I noted that the jobs data coming out of the US was interesting. I believe it will help us gauge the continued strength of this extended economic cycle. Moreover I suspect some of the conclusions from an analysis of tight labour markets could be applied outside the US albeit that in the UK, I think there will be other influences that will create a different impact, net migration for example.
But back to the US where, for the first time since the data has been collected (but this is only 2002) the number of job openings equals the unemployment rate. Simplistically therefore there should be no unemployment. Extraordinary! However there are obvious regional variations as the level of unemployment is not consistent nationwide. Nevertheless it is encouraging for continuing US growth prospects that so many jobs are being created.
Admittedly, some care needs to be applied. A tighter job market will mean that firms will have to offer higher wages to acquire the best employees (clearly good news for workers) but this will have an impact on corporate margins and is likely to result in higher inflation. Thus the FOMC may feel the need to raise rates more quickly than anticipated - perhaps on three more occasions this year.
But it should also lead to higher consumption which will further fuel continuing growth in the US economy. And, as so many commentators report, the US consumer is a key driver to the success of the global economy. Therefore it is not surprising to see some consumer confidence numbers at record highs. Equally, as interest rate increases are already coming through, if there is wage growth, it will help consumers afford the debt burden that currently weighs heavily on them. I read recently that the average debt associated with auto purchase continues to climb. Not to mention the frightening levels of student debt (although the US government also carries that burden)
Bizarrely though the tight labour market does not seem to producing higher wages. The Atlanta Fed (https://www.frbatlanta.org) indicates that wage growth is FALLING for both full-time and 'prime age' workers. Therefore their GDPNow forecast predicts slower growth in Q1. Thus the overall picture is nuanced and I for one will take time to draw conclusions from any new data point.
With markets in their current febrile state (over)reacting to the latest tweet from POTUS on the escalation of the trade wars, I hope some objectivity can prevail as to the performance of the real economy.