Weekly Economic Report
We are largely going to take a pass on the employment report. The 304,000 gain was obviously strong, but with a 90,000 downward revision to last month’s booming 312,000 increase we are suspicious of a coming offset or revision. After revisions, November and December averaged 209,000 -- in line with the 211,000 over the prior four months. The six month average for both payroll and household jobs gains increased rapidly in the first half of 2018 and tailed off in the second half – exactly as one would expect from an economy with 4.2% growth in Q2, 3.2% in Q3 and 2.5% for Q4 (according to the Atlanta Fed). Average Hourly Earnings and the Employment Cost Index show wage growth has accelerated, so an easing in hiring should be expected. We note that Q4, productivity should again be weak, and that wages are already well above inflation plus productivity, squeezing margins. We expect the US economy will slow in the first half and employment and wage growth as well.