Below are selected charts and excerpts highlighting some of the research we have published recently.
Below are selected charts and excerpts highlighting some of the research we have published recently.
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Has payroll growth slowed enough that employers can stop bidding for workers? The chart below shows the growth in wages (average hourly earnings) on a month-over-month basis (blue) and a year-over-year basis (orange). December’s monthly wage figure rose to 0.4%. Year-over-year wage growth has bottomed near 4.1%. So far, it looks like payroll growth has not slowed enough to bring down wage growth. If workers are getting a 4% raise, they can “pay for” 4% inflation.
The black line is the actual GDP through Q3 2023, booming at 4.9%. The three colored lines come from a survey of about 70 economists by Bloomberg. It plots the median forecast for the subsequent six quarters of real GDP. Shown are the December 2022 (red), June 2023 (blue), and December 2023 (green) median forecasts. The street consensus is a significant pullback in the economy, a.k.a. a “soft landing.”
2023 began as a year of struggling fixed-income returns even after a disastrous 2022. The last FOMC rate hike was in July 2023 and the narrative has shifted from tighter policy to exactly when looser policy will arrive. Many expect the early months of 2024. As the Federal Reserve’s pivot on rates becomes the base case for 2024, global bonds began to rally, posting the largest 2-month gain since this index began in 1990.
While global bond markets have seen a monstrous rally over the past two months, combined net flows indicate one of the first monthly bond outflows since January of 2022. Rolling two-month returns for the global bond market Index have reached 9.5%. This is the largest two-month rise since 2009. The chart below shows that combined global bond mutual fund & ETF flows saw a $4.76B outflow in November. This comes as a bit of a surprise as 2023 has been a year of inflows into global bond funds, specifically in November while bonds were rallying.
English statistician George Box once said, “All models are wrong, but some are useful.” This now applies to the LEI. It has been wrong for many months, but it is still useful. The LEI is an index of ten indicators that are supposed to model the coming trend of the economy. The chart below shows the history of this index since 2000. Notice it peaked in late 2021 and has been going straight down.
