Monthly Economic Update March 2024
Chris Polimeni, MBA presents:
Monthly Economic Update March 2024
As a financial advisor, I want to share with you some of the key economic developments that occurred in the last month. Here are some of the highlights:
US job growth advances in February. Unemployment rate rises to 3.9% and U.S. job growth accelerated in February. However, a rise in the unemployment rate and moderation in wage gains kept on the table an anticipated interest rate cut in June from the Federal Reserve, source Reuters 3/8/2024.
Nonfarm payrolls increased by 275,000 jobs last month, the labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday. Data for January was revised down to show 229,000 jobs created instead of 353,000 as previously reported, source Reuters 3/8/2024.
Economists polled by Reuters had forecast 200,000 jobs added, with estimates ranging from 125,000 to 286,000. Payrolls are above the roughly 100,000 jobs needed per month to keep up with growth in the working age population.
The working-age population in the U.S. is 207,406,609 as of December 2022. 61.9% of the U.S. population is of working age as defined by the OECD (15-64), and with a 2022 national population of 334.2 million, we're left with a working age population of approximately 207.4 million.
The labor market is supporting the economy, which is outperforming its global peers. Economists do not expect a recession this year. The unemployment rate rose to 3.9% in February after holding at 3.7% for three straight months. Despite a rash of high-profile layoffs at the start of the year, employers are generally holding on to their workers after struggling to find labor during the COVID-19 pandemic. Though labor supply and demand are falling back into balance, amid a rise in immigration and older workers delaying retirement, some sectors of the economy remain desperate for skilled workers, source Reuters 3/9/2024.
There were 1.45 open jobs for every unemployed person in January, still above the average of 1.2 during the year before the pandemic, government data showed this week. The Fed's Beige Book report also showed "difficulties persisted attracting workers for highly skilled positions" in February. Average hourly earnings edged up 0.1% last month after gaining 0.5% in January. That lowered the year-on-year increase in wages to a still-high 4.3% in February from 4.4% in January, source Reuters 3/9/2024.
Fed Chair Jerome Powell told lawmakers this week that rate cuts would "likely be appropriate" later this year, but emphasized they "really will depend on the path of the economy."
U.S. inflation, as measured by the consumer price index, CPI, fell to 3.1% year-on-year in January, from 3.4% in December. Economists polled by Reuters expected a lower reading of 2.9%.
The inflation rate has fallen from a peak of 9.1% in June 2022, causing the Fed to call time on interest rate hikes and start thinking about cuts, source Reuters 2/13/2024.
The yield on 10-year Treasury notes soared and was last up twelve basis points at 4.291%, from 4.154% before the data. The dollar index, which measures the U.S. currency against six rivals, rose sharply and was last up 0.41% at 104.57, while the euro was down 0.39% at $1.073, source Reuters 2/13/2024.
Investors on Tuesday were pricing in around ninety-four basis points of cuts from the Fed by the end of the year, down from around 112 before the data. They saw a 40% chance of the first cut coming by May, compared to 71% previously, according to money market pricing, around 145 basis points of cuts were priced in at the start of February. However, strong economic data has caused investors to dial down their expectations, source Reuters 2/13/2024.
The Fed's preferred inflation gauge logged its lowest annual increase since March 2021 in January, matching Wall Street forecasts, while monthly prices rose at the fastest rate in a year. The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 2.8% over the prior year in January, the slowest annual increase since a 2.2% increase in March 2021, source Yahoo Finance 2/29/2024.
TIP OF THE MONTH
Almost all stock rallies begin with short covering. Be ready to act as things can move quickly off the bottoms.
Compared to the prior month, core PCE rose 0.4%, the most since January 2023 and an increase from the 0.1% increase seen in December. The monthly increase marked a stark shift in the inflation data. Prior to Thursday's release, the six-month annualized rate of price increases had been below the Fed's 2% goal for two consecutive months. After the January data, the six-month annualized PCE price increase is 2.5%, source Yahoo Finance 2/29/2024.
Inflation is indeed coming down, as measured by the PCE and the Feds are going to most probably lower interest rates numerous times by the end of 2024.
"Fed officials have signaled they do not need better news on inflation to cut rates, just continued good news," Oxford Economics deputy chief US economist Michael Pearce wrote in a note to clients. "With the trend in inflation still downward, gradual rate cuts this year are still on the table."
QUOTE OF THE MONTH
"There is a long history of humans and machines working together."
-Sam Altman-
领英推荐
To slow inflation the Fed's raised rates by 500 basis points since March of 2022. The real story is how strong the US economy has held up under this onslaught.
They say that the feds raise rates until something breaks. Well, surely commercial real estate is now broken and the regional banks holding those loans are suffering. There may be some consolidation and more Bank liquidity issues. Moreover, the feds reducing interest rates in 2024 and 2025 will help this problem significantly.
At the end of the day, the March 2024 Economic Update offers many reasons for investors to be optimistic. Many of the negative things that took the market down are seemingly now in the rear view mirror. By staying informed and making smart investment decisions, there are plenty of opportunities to grow wealth and achieve financial goals.
As a financial advisor, I recommend that you diversify your portfolio across different asset classes, regions, and sectors, and adjust your risk exposure according to your goals and preferences. Please contact me if you have any questions or concerns about your financial situation or plan.
Many of the views and opinions included herein may or may not be shared by Western International Securities and or its registered representative and should not be construed as investment advice.
I'll bring you a recap of the March developments in the economy and markets at the top of April.
Between now and then, please feel free to call me or email me at number or e-mail listed below.
You can also schedule appointments directly to my electronic calendar using the appointments hyperlink in my signature file below.
Sincerely,
Chris W. Polimeni, MBA
Financial Advisor
Branch Manager
Western International Securities
Member FINRA/SIPC
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19200 Von Karman Ave. Suite 600
Irvine, CA 92612
Phone: 800-874-0768
Fax: 949-222-5704
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Website: https://chrispolimeni.com
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