8.9 C
New York
Monday, January 30, 2023

Subscribe

Fed Leading Indicator Shows Unemployment Rate Is Poised To Pick Up

Authored by Ye Xie, Bloomberg Editorial,

While the unemployment rate ticked down again, a leading indicator suggests it is set to increase in coming months. If so, that will put pressure on the equity market.

The index, created by Merk Investments’s Nick Reece, tracks the z-scores of six indicators (identified in a 2013 San Francisco Fed paper) that tend to predict trends in the unemployment rate. Those indicators are payroll growth, initial and continuous jobless claims, capacity utilization and ISM manufacturing and the job components in the consumer confidence survey.

The index bottomed earlier last year and has been rising ever since, driven by slower payroll growth and declines in ISM manufacturing.

To be sure, there were false alarms in the past, such as in 2018-2019. Still, the Fed’s intention is to slow wage growth to curb inflation.

If the labor market doesn’t cool, the Fed will have to tighten more. Until the Fed succeeds, the equity market is likely to stay under pressure.

This post was originally published on this site

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments

Stay Connected

159,327FansLike
407,353FollowersFollow
2,150SubscribersSubscribe

Latest Articles

0
Would love your thoughts, please comment.x
()
x