Rumors of Job Market Demise Have Been Greatly Exaggerated | Jack Farley & Max Wiethe
Monetary Matters with Jack Farley
Deep Dive
How did the job market perform in November 2024 according to the latest jobs report?
The job market added 227,000 jobs in November 2024, slightly above the market's expectation of 200,000. The unemployment rate ticked up from 4.14% to 4.24%, increasing by 10 basis points.
Why is the decline in retail jobs before Black Friday not a bad sign?
Over the past 10 years, the retail sector has shown an average gain of 640,000 jobs in November, but this number includes both positive and negative changes. The sector is in secular decline due to online shopping, and losing 28,000 jobs is not unusual or indicative of a broader economic issue.
What is the divergence between the household survey and the establishment survey, and how persistent has it been?
The household survey showed a decline in employment by 368,000 in November, while the establishment survey (non-farm payrolls) showed an increase of 227,000 jobs. This divergence has been persistent, with the household survey showing flat employment over the past year, while the establishment survey shows strong job growth.
Why is the quality of economic data deteriorating, and what are the implications?
The quality of economic data, particularly employment data, is deteriorating due to lower survey response rates. This can lead to a false picture of the economy, potentially affecting policy decisions. While interest rates may be restrictive, the data might not accurately reflect the true state of the labor market or inflation.
What are the main reasons for the strong growth in healthcare sector employment?
The healthcare sector's employment growth is driven by both the aging population and the increasing administrative costs of healthcare. While the former is a natural demographic trend, the latter has led to a higher number of lower-paying administrative jobs, which can be seen as a societal issue rather than an economic one.
How do current US policy rates compare to historical levels, and what does this mean for the economy?
Current US policy rates of 4.75% are considered restrictive, with a real interest rate of 1.5% (nominal rate minus inflation). While these rates have slowed nominal growth, inflation has fallen by more, leading to an increase in real growth. This suggests that the economy remains strong despite restrictive rates.
Why has the stock market performed exceptionally well in 2024?
The S&P 500 is up about 28% year-to-date in 2024, placing it in the 88th percentile compared to the past 95 years. The market's strong performance is driven by psychological factors, such as the fear of missing out (FOMO) and the desire to lock in gains. While the market looks overvalued, there are still pockets of undervalued stocks.
What are the potential risks of tariffs on the stock market, and are they priced in?
Tariffs are not currently priced into the market and have the potential to cause shock-like effects, particularly if they are broad-based. While some sectors may benefit, others could be significantly harmed. The impact of tariffs remains a major unknown, especially as policy decisions are expected to materialize in early 2025.
What is the role of private equity continuation vehicles, and how are they evolving?
Private equity continuation vehicles are used to hold and manage companies that are not selling, allowing new investors to invest in them. With the IPO market closed and strategic buyers being cautious, these vehicles are becoming more common. Hedge funds are also getting involved, and they are often used to finance dividends to private equity companies.
What is the Monetary Matters house view on inflation for 2025, and how does it factor in political uncertainties?
The house view is that inflation will continue to decline, reaching around 2% by 2025. However, this view may not fully account for the potential inflationary impact of Trump's policies, such as tariffs and deporting workers. The exact path of inflation remains uncertain due to these political factors.
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