Dana Peterson surprised me today. In a good way. Here’s why.
We just got the June jobs numbers from the Labor department. The 206,000 increase in payrolls beat the forecast for 190,00 gain. But the April and May numbers in total were revised lower by a total of 100,000 jobs. Now it looks like jobs have not been growing as fast as we thought. And the unemployment rate edged by another tenth of a percent to 4.1% and is up more than 0.5% points in a short span of time. This is seen as a sign there is more slack in the labor market. Many see it as a red flag signaling a recession is in the works.
Not Dana.
First she sees jobs growth holding up well in the “usual suspects” like construction, health care, and government. And she says in other industries companies are holding on to their workers, so they don’t need to hire as many now, “so I think we shouldn’t the kind of slowing in payroll gains, or even the fact that you’re not seeing outsized gains away from those usual suspects as something negative.”
As for the steady rise in the unemployment rate, she stresses that even at 4.1% just a few percentage points away from the 3.4% rate that we saw last year, in 2023, “which…if it wasn’t the all-time low is pretty close to it.”
“In fact the natural rate of unemployment, which is kind of your sweet spot where the labor market is not in trouble, and your not generating inflation, is 4.4%,” she added.
Dana says the Fed would have to see unemployment, which she thinks may have already peaked, to rise much faster than this to really start worrying about the labor market.
Bottom line, she says the latest jobs data show the Fed in a “Goldilocks scenario” where it can keep rates higher for longer and wait as long as it needs to for inflation to come down and start cutting rates, which she sees happening at year’s end with one cut in November, followed possibly by one in December.
So dive in now and get her analysis of what’s driving inflation and why it’s going to gradually decline. Her forecast for next week’s consumer price index. What she expects from Chair Powell when he testifies to Congress next week.
And hear why she is “very concerned” about the rising budget deficit which she thinks is “starting to seep into the psyche…the zeitgeist of the financial markets.” With the government issuing more and more debt, she also sees this raising the question of “who’s going to buy it?” as some of the biggest buyers like China and Japan diversify away from U.S. Treasuries.
As for her background, Dana is the Chief Economist and Leader of the Economy, Strategy & Finance Center at The Conference Board. Prior to this, she served as a North America Economist and later as a Global Economist at Citi, the world’s largest investment bank. Her wealth of experience extends to the public sector, having also worked at the Federal Reserve Board in Washington, D.C.
Peterson Sees "Goldilocks Scenario" for Fed in Jobs Report