First, it was Dolly Parton “Workin’ 9 to 5.” Then, it was Tommy and Gina, who were working on the docks and at the diner all day, respectively.
Whether we are talking about musical icons like Dolly Parton and Bon Jovi or the markets, it is all about labor. And this week, that’s exactly what the focus is going to be for investors. Actually, slightly less focus on labor itself, and more focus on labor’s impact on inflationary forces in determining future policy paths for 2024 and beyond.
You see, it has been 40 years since U.S. labor, in general, has experienced the real wage gains it is currently witnessing (see chart of the week below). While some of those gains are due to inflation, a good portion is due to a supply/demand imbalance in the labor market, especially the services-oriented labor markets and lower-income jobs.
While those real wage gains are somewhat stabilizing inflation, they are also enhancing consumer income (as evidenced by last week’s personal income numbers), thus bolstering consumer spending and contributing significantly to the economic growth observed throughout last year.
And the trend continues… the most recent Atlanta Fed GDPNow estimate for first quarter GDP sits at 3.2% in comparison to economist estimates of just 1.7%. The resiliency of economic growth combined with the stubbornness of inflation in the face of swift policy tightening – which began in March 2022 – has made the policy outlook rather cloudy now, two years after that initial rate hike. A good portion of that resiliency has been connected to tight labor markets, and this week’s labor report will serve as a key “toll gate review” of the current economic conditions in determining policy action not only this month but going forward.
For now, we are going to think like Bon Jovi and “hold on to what we’ve got.”
- S. Inflation – Core PCE was reported at 2.8% on a year-over-year basis, in line with an estimate of 2.8%.
- S. Personal Income – Personal income for the month of January came in at 1.0% versus an estimate of 0.4% on a month-over-month basis.
- India Economic Growth – India saw their fastest rate of economic growth in six quarters with GDP of 8.4% versus estimates of 6.6%.
Monday
- No Significant Data
Tuesday
- Eurozone Services PMI
- K. Composite PMI
- Eurozone Producer Prices
- S. Composite PMI
- ISM Non-Manufacturing PMI
Wednesday
- Eurozone Retail Sales
- ADP National Employment
- JOLTS Job Openings
- Bank of Canada Rate Decision
Thursday
- Challenger Layoff Announcements
- European Central Bank Rate Decision
- S. Initial Jobless Claims
- S. Unit Labor Costs
- S. Consumer Credit
Friday
- German Industrial Production
- Eurozone GDP & Employment
- S. Employment Report
- Chinese CPI
Name the country music star who dueted with Jon Bon Jovi on the song “Who Says You Can’t Go Home?” and played Dolly Parton’s mother in the TV movie “Dolly Parton’s Coat of Many Colors.”
Answer: Jennifer Nettles.
U.S. Labor & Real Wages Gains
Source: BLS, FactSet, J.P. Morgan Asset Management
