Be Careful: Job and Retail Sales Data Are Always Good Until They Aren’t

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Be Careful: Job and Retail Sales Data Are Always Good Until They Aren’t
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Market Overview Analysis by Lance Roberts covering: S&P 500, iShares Core S&P 500 ETF, SPDR® S&P 500, S&P 500 Futures. Read Lance Roberts's latest article on Investing.com

Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.Despite substantially tighter monetary policy, the strength of jobs and retail sales stumped expectations of a recessionary downturn in 2022. However, such was not surprising.

Given that personal consumption consistently accounts for over two-thirds of economic activity, it is not surprising that when you send money directly to households, the result would be both a surge in consumption and higher inflation. Three years after the pandemic-driven economic shutdown, monetary liquidity remains highly elevated as a percentage ofAs that excess liquidity expires, the rate of economic growth, and ultimately inflationary pressures, will reverse.

This is an even more critical issue when understanding how the Federal Reserve manages monetary policy in the “rear view” mirror. Current real-time economic data suggests the economy is rapidly moving from economic slowdown toward recession. The signals are becoming more evident from inverted yield curves to the 6-month rate of change of the Leading Economic Index.However, while those signals generally precede economic recessions, jobs, and retail sales data lag.data.

Such creates the probability of the Fed over-tightening monetary policy and turning an economic slowdown into a more severe economic contraction.scenario, the problem of looking backward leaves everyone vulnerable to a head-on collision with what lies ahead of us.Now that we have our first estimate of GDP for Q3, we also have our first estimate of M2 velocity for the third quarter. Because there is an amazing amount of uninformed hypothesis...

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