Although declining during the course of 2023, according to the Job Openings and Labor Turnover Survey (JOLTS) there are still 8.79 million jobs available as compared to 6.27 million individuals in search of a one, this according to data from the Bureau of Labor Statistics. Until that gap narrows significantly, the Unemployment Rate rises well above its current level of 3.7% and Initial Claims for Unemployment Benefits rise, the economy should continue to expand modestly or at worst, enter a short, shallow recession.The one caveat to the scenario outlined above would be if the Fed remains too tight for too long, refusing to cut interest rates at some point during 2024. The futures market is projecting six 0.25% reductions in the Fed Funds Rate while the Fed itself is projecting three. At this point we believe that the total number will be somewhere in between. If this proves correct, equities should be supportive by a somewhat accommodative Fed and adequate corporate earnings.
As the labor market is considered a lagging economic indicator (reflects past economic activity) because businesses adjust their labor force at a slower pace than there are changes in the economy, investors should keep their eyes out for changes to the above data.
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