Unemployment low (for now) and no good news in horizon about it
🎧💡 #15 Macro & Business Insights
Hi all, and welcome back to The Macro & Business Insights!
What you’ll find in this episode:
What the markets is excepting about the unemployment rate
Why FED is in a good position to continue their way
Why institutional investors are already talking about the last rate hike by central banks?
Blackrock don’t think equities are fully priced for recession. But we stand ready to turn positive via their assessment of the market’s risk sentiment or how much economic damage is in the price.
Quits highs, unemployment low (for now)
For now, workers still feel confident in their ability to leave their current job and/or find a new one, and companies have thus far been mostly reluctant to get rid of workers (save for tech and other related sectors that have started to lay people off).
However, Charles Schwab think an eventual move down in the percentage of job leavers will be consistent with a recessionary move up in the unemployment rate.
Not only is history supportive of that, but the Fed is telling us in its own forecast for unemployment that a recession is expected.
The central bank's latest expectation of 4.4% in 2023 would be a 0.7% increase from the current rate. In the long-term history of the unemployment rate, the average increase from its pre-recession trough to its level at the start of a recession is just 0.3%.
FED is in a good position to continue their way
The labour market is still well equipped, and the FED is in a good position to continue their way.
History shows that weakness in housing sentiment has led moves in unemployment (both to the downside and upside) quite well.
Does that guarantee that the unemployment rate will be near 9% a year from now? No; but it shouldn't be lost on investors that housing's track record of leading the economy is strong.
In fact, the Fed is expecting (pushing for?) a move up in the unemployment rate.
For now, the majority of labor pain has been witnessed in companies' weaker demand for employees, including fewer job openings and more hiring freezes.
Are we sure this period will pass? And Then?
The history teaches us that each cycle arrives for passing to another cycle with the time and we can see the first papers and charts (as the last one below) that show us what may happen to the S&P 500 after the final rate hike by the FED.
We can conclude that (looking the chart) there have been situations that has evolved positively and others negatively.
So, as always…each situation is different, and no one can predict the markets. Stay tuned and at the next piece of Macro & Business Insights.
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Disclosure
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.