A Decent Job Gain, Though With Some Soft Details
The headline jobs number in the February employment report was decent certainly better than some feared—but most of the details of the report were soft. Nonfarm employment increased 151k last month, with only modest revisions to prior months. This was close to the average seen over the last year. However, the unemployment rate rose from 4.01% in January to 4.14% last month. And after dipping in January, the average workweek failed to recover last month, staying unchanged at a very low 34.1 hours.
Repaying student loans is a drag
In our 2025 Outlook we highlighted how strong consumer balance sheets have been supporting spending. While real PCE growth surged over 4% in 2H24, we look for consumer spending in 1H25 to normalize to above 2% given the still solid labor market. Rising delinquencies had led to some questions about the health of consumers, but the latest 4Q household debt and credit report from the NY Fed shows delinquency rates for credit cards and auto loans have stabilized
FOMC minutes reinforce a pause
The minutes of the January FOMC meeting confirmed the message that Chair Powell gave at the January press conference and his subsequent Congressional testimony: that the Fed is in no hurry to cut rates further — but also retains its easing bias. The minutes revealed that participants saw the “current high degree of uncertainty” as warranting a “careful approach” to changing monetary policy. With inflation still “somewhat elevated,” participants indicated they want to see further progress on inflation before adjusting rates.
Import Prices Cooler In January
In contrast with other January inflation data this week, import prices came in slightly softer than expected. The headline measure rose 0.3% last month, but unlike most other inflation data these are not released as seasonally adjusted. On a year-ago basis, import prices grew 1.9% in January, down from an upwardly-revised 2.3% in December but still near the higher end of its range over the past two years; a year-ago import prices had been contracting at a -1.3% annual pace.
January CPI surprises higher
While the January final goods PPI represented another upside surprise to consensus forecasts for inflation last month, it was more closely aligned with our own forecast for firming. More importantly, the key components that feed into our core PCE tracking model were uniformly soft (once seasonally adjusted to match the construction of core PCE—the source data from the PPI are reported as NSA), reinforcing our below-consensus tracking estimate
January CPI surprises higher
The January consumer price index (CPI) surprised to the upside as the headline index rose 0.5% (0.467% to three decimals), nudging the year-ago inflation rate back to 3.0%.The surprise was largely in the core (ex. food and energy) index, which rose 0.4 (0.446% to three decimals) in January, also nudging up year-ago core CPI inflation, to 3.3%.
The North American scrum
Risks to the US outlook economic escalated materially over the weekend. President Trump’s executive orders threatening to increase tariff rates on imports from Canada (10% energy, 25% non energy), China (10%), and Mexico (25%), are set to go into effect at 12:01 Tuesday morning. De minimis imports (under $800) would no longer be excluded from tariffs nor will duty drawbacks be available.
When Feds freeze, states sneeze!!
The announced pause in federal loan and grant program payments was rescinded on Wednesday, resolving the confusion
caused earlier in the week. This episode highlighted both the breadth and depth of these programs and their importance to the economic life of the American people.
Wages firm modestly in 4Q—ECI against cooling trend.
The Employment Cost Index, matched our and consensus expectations with a 0.9% rise in the headline total compensation measure 4Q, or 3.6% at an annualized quarterly pace.
FOMC: Please hold for further information
As widely expected, the Fed kept policy unchanged today with a 4.25 to 4.5% target rate. The decision was unanimous among the new set of voters for 2025. The guidance language was left unchanged as anticipated, and Chair Powell argued that both the economy and policy are in a good place now.
The Evolution Payroll Seasonality
In last week’s employment report September nonfarm payroll employment increased 254k (223k private), well above the trailing three-month average of 140k (103k private), which raised discussion on the seasonal adjustment.
Euro area: Making progress on disinflation
Progress on Euro area disinflation is undeniable. Headline inflation is now below 2%oya having peaked at 10.6% two years ago. Meanwhile, core inflation is now 2.7%oya, a 3%-pts drop since March 2023.
US: Dollar policy in a second Trump presidency
A recent Bloomberg Businessweek interview with Republican presidential nominee Trump began with an open-ended question: “What kind of economy do you want for the American people in terms of innovation, opportunity and global competitiveness?”
China's 3-Arrows Policy Stimulus
China launched a new round of policy easing in late September, and the comprehensive package beat market expectations. The positive surprise raised market expectations for further stimulus measures.
He’s not leaving
The FOMC cut its target rate by 25bp today, as expected, taking the fed funds range
down to 4.5-4.75%. Chair Powell’s press conference sounded a little dovish to us.
Solid August wage data point to sustained momentum in pay growth
Our forecast for a series of policy rate rises reflects a call that the BoJ will look through volatility in the cyclical activity data to focus on what it terms a “virtuous cycle” between rising wages and higher prices.
Hello Cleveland, Goodbye Recalibration
As broadly expected, the FOMC cut the target range for the fed funds rate by 25bp
today to 4.25-4.5%, but as Chair Powell indicated at the press conference, policy
is now entering a “new phase” where the Committee will move more cautiously.
Oil Giveth Taketh Away
Tensions in the Middle East drove crude oil prices higher in recent weeks, raising concerns that this shock could boost inflation and dampen global growth.
Greater China VS TRUMP TRADE WAR
The Trump win in the U.S. presidential election significantly increased the external risk faced by the Chinese economy. On our base case scenario that US tariffs on Chinese imports will be hiked to 60% in 1H25, China’s growth outlook will be damaged by around 2%pts
China trump trade cross-hairs
While the broader trade war (10%-20% tariffs on all US imports) will likely be put on hold, tariffs on China are expected to ramp up quickly. The average effective tariff rate on Chinese goods in the 2018-19 trade war was lifted from 3% up to 20%.
Europe: defence and Ukraine support under Trump 2.0
Sizable 2025 Ukraine support is already available, but concerns about military aid shortfall without US. Ukraine’s reconstruction unlikely to have near-term
EU growth impact.
Repaying student loans is a drag
In our 2025 Outlook we highlighted how strong consumer balance sheets have been supporting spending. While real PCE growth surged over 4% in 2H24, we look for consumer spending in 1H25 to normalize to above 2% given the still solid labor market. Rising delinquencies had led to some questions about the health of consumers, but the latest 4Q household debt and credit report from the NY Fed shows delinquency rates for credit cards and auto loans have stabilized
Import Prices Cooler In January
In contrast with other January inflation data this week, import prices came in slightly softer than expected. The headline measure rose 0.3% last month, but unlike most other inflation data these are not released as seasonally adjusted. On a year-ago basis, import prices grew 1.9% in January, down from an upwardly-revised 2.3% in December but still near the higher end of its range over the past two years; a year-ago import prices had been contracting at a -1.3% annual pace.
January CPI surprises higher
While the January final goods PPI represented another upside surprise to consensus forecasts for inflation last month, it was more closely aligned with our own forecast for firming. More importantly, the key components that feed into our core PCE tracking model were uniformly soft (once seasonally adjusted to match the construction of core PCE—the source data from the PPI are reported as NSA), reinforcing our below-consensus tracking estimate
January CPI surprises higher
The January consumer price index (CPI) surprised to the upside as the headline index rose 0.5% (0.467% to three decimals), nudging the year-ago inflation rate back to 3.0%.The surprise was largely in the core (ex. food and energy) index, which rose 0.4 (0.446% to three decimals) in January, also nudging up year-ago core CPI inflation, to 3.3%.
The North American scrum
Risks to the US outlook economic escalated materially over the weekend. President Trump’s executive orders threatening to increase tariff rates on imports from Canada (10% energy, 25% non energy), China (10%), and Mexico (25%), are set to go into effect at 12:01 Tuesday morning. De minimis imports (under $800) would no longer be excluded from tariffs nor will duty drawbacks be available.
When Feds freeze, states sneeze!!
The announced pause in federal loan and grant program payments was rescinded on Wednesday, resolving the confusion
caused earlier in the week. This episode highlighted both the breadth and depth of these programs and their importance to the economic life of the American people.
Wages firm modestly in 4Q—ECI against cooling trend.
The Employment Cost Index, matched our and consensus expectations with a 0.9% rise in the headline total compensation measure 4Q, or 3.6% at an annualized quarterly pace.
FOMC: Please hold for further information
As widely expected, the Fed kept policy unchanged today with a 4.25 to 4.5% target rate. The decision was unanimous among the new set of voters for 2025. The guidance language was left unchanged as anticipated, and Chair Powell argued that both the economy and policy are in a good place now.
The Evolution Payroll Seasonality
In last week’s employment report September nonfarm payroll employment increased 254k (223k private), well above the trailing three-month average of 140k (103k private), which raised discussion on the seasonal adjustment.
Euro area: Making progress on disinflation
Progress on Euro area disinflation is undeniable. Headline inflation is now below 2%oya having peaked at 10.6% two years ago. Meanwhile, core inflation is now 2.7%oya, a 3%-pts drop since March 2023.
US: Dollar policy in a second Trump presidency
A recent Bloomberg Businessweek interview with Republican presidential nominee Trump began with an open-ended question: “What kind of economy do you want for the American people in terms of innovation, opportunity and global competitiveness?”
China's 3-Arrows Policy Stimulus
China launched a new round of policy easing in late September, and the comprehensive package beat market expectations. The positive surprise raised market expectations for further stimulus measures.
He’s not leaving
The FOMC cut its target rate by 25bp today, as expected, taking the fed funds range
down to 4.5-4.75%. Chair Powell’s press conference sounded a little dovish to us.
Solid August wage data point to sustained momentum in pay growth
Our forecast for a series of policy rate rises reflects a call that the BoJ will look through volatility in the cyclical activity data to focus on what it terms a “virtuous cycle” between rising wages and higher prices.
Hello Cleveland, Goodbye Recalibration
As broadly expected, the FOMC cut the target range for the fed funds rate by 25bp
today to 4.25-4.5%, but as Chair Powell indicated at the press conference, policy
is now entering a “new phase” where the Committee will move more cautiously.
Oil Giveth Taketh Away
Tensions in the Middle East drove crude oil prices higher in recent weeks, raising concerns that this shock could boost inflation and dampen global growth.
Greater China VS TRUMP TRADE WAR
The Trump win in the U.S. presidential election significantly increased the external risk faced by the Chinese economy. On our base case scenario that US tariffs on Chinese imports will be hiked to 60% in 1H25, China’s growth outlook will be damaged by around 2%pts
China trump trade cross-hairs
While the broader trade war (10%-20% tariffs on all US imports) will likely be put on hold, tariffs on China are expected to ramp up quickly. The average effective tariff rate on Chinese goods in the 2018-19 trade war was lifted from 3% up to 20%.
Europe: defence and Ukraine support under Trump 2.0
Sizable 2025 Ukraine support is already available, but concerns about military aid shortfall without US. Ukraine’s reconstruction unlikely to have near-term
EU growth impact.
January CPI surprises higher
The January consumer price index (CPI) surprised to the upside as the headline index rose 0.5% (0.467% to three decimals), nudging the year-ago inflation rate back to 3.0%.The surprise was largely in the core (ex. food and energy) index, which rose 0.4 (0.446% to three decimals) in January, also nudging up year-ago core CPI inflation, to 3.3%.
The North American scrum
Risks to the US outlook economic escalated materially over the weekend. President Trump’s executive orders threatening to increase tariff rates on imports from Canada (10% energy, 25% non energy), China (10%), and Mexico (25%), are set to go into effect at 12:01 Tuesday morning. De minimis imports (under $800) would no longer be excluded from tariffs nor will duty drawbacks be available.
When Feds freeze, states sneeze!!
The announced pause in federal loan and grant program payments was rescinded on Wednesday, resolving the confusion
caused earlier in the week. This episode highlighted both the breadth and depth of these programs and their importance to the economic life of the American people.
Wages firm modestly in 4Q—ECI against cooling trend.
The Employment Cost Index, matched our and consensus expectations with a 0.9% rise in the headline total compensation measure 4Q, or 3.6% at an annualized quarterly pace.
FOMC: Please hold for further information
As widely expected, the Fed kept policy unchanged today with a 4.25 to 4.5% target rate. The decision was unanimous among the new set of voters for 2025. The guidance language was left unchanged as anticipated, and Chair Powell argued that both the economy and policy are in a good place now.
The Evolution Payroll Seasonality
In last week’s employment report September nonfarm payroll employment increased 254k (223k private), well above the trailing three-month average of 140k (103k private), which raised discussion on the seasonal adjustment.
Euro area: Making progress on disinflation
Progress on Euro area disinflation is undeniable. Headline inflation is now below 2%oya having peaked at 10.6% two years ago. Meanwhile, core inflation is now 2.7%oya, a 3%-pts drop since March 2023.
US: Dollar policy in a second Trump presidency
A recent Bloomberg Businessweek interview with Republican presidential nominee Trump began with an open-ended question: “What kind of economy do you want for the American people in terms of innovation, opportunity and global competitiveness?”
China's 3-Arrows Policy Stimulus
China launched a new round of policy easing in late September, and the comprehensive package beat market expectations. The positive surprise raised market expectations for further stimulus measures.
He’s not leaving
The FOMC cut its target rate by 25bp today, as expected, taking the fed funds range
down to 4.5-4.75%. Chair Powell’s press conference sounded a little dovish to us.
Solid August wage data point to sustained momentum in pay growth
Our forecast for a series of policy rate rises reflects a call that the BoJ will look through volatility in the cyclical activity data to focus on what it terms a “virtuous cycle” between rising wages and higher prices.
Hello Cleveland, Goodbye Recalibration
As broadly expected, the FOMC cut the target range for the fed funds rate by 25bp
today to 4.25-4.5%, but as Chair Powell indicated at the press conference, policy
is now entering a “new phase” where the Committee will move more cautiously.
Oil Giveth Taketh Away
Tensions in the Middle East drove crude oil prices higher in recent weeks, raising concerns that this shock could boost inflation and dampen global growth.
Greater China VS TRUMP TRADE WAR
The Trump win in the U.S. presidential election significantly increased the external risk faced by the Chinese economy. On our base case scenario that US tariffs on Chinese imports will be hiked to 60% in 1H25, China’s growth outlook will be damaged by around 2%pts
China trump trade cross-hairs
While the broader trade war (10%-20% tariffs on all US imports) will likely be put on hold, tariffs on China are expected to ramp up quickly. The average effective tariff rate on Chinese goods in the 2018-19 trade war was lifted from 3% up to 20%.
Europe: defence and Ukraine support under Trump 2.0
Sizable 2025 Ukraine support is already available, but concerns about military aid shortfall without US. Ukraine’s reconstruction unlikely to have near-term
EU growth impact.
