You can see in the chart above that most industries are still actively hiring, suggesting that Fed actions still haven't slowed the desire for workers.4
The economy shrugged off recession worries in Q4
Despite all the recession doom and gloom, the economy grew 2.9% in the last three months of 2022.5
However, consumer spending weakened slightly, indicating that Americans might be trimming expenses. Since consumer spending accounts for 70% of economic growth in the U.S., it's a potential warning sign I'm keeping tabs on.
I see a few takeaways about the current state of the economy
But, before I dive into them, I want to point out two important caveats about economic data:
Much of the initial data we see in the headlines is based on incomplete estimates that get revised later as more data is processed. These big data bureaus try to balance releasing data quickly enough to be useful and getting the complete picture.
Data is often impacted by seasonal trends that can cause spikes or "noise" in the data. That's why we look for trends rather than single data points.
Here's what I see:
Despite tech layoffs and gloomy headlines, many sectors seem to still be going strong, job-wise.
Interest rate hikes aren't slowing down growth as much as the Fed hoped, though inflation is definitely showing a downward trend.
While recession fears are definitely real and based on solid concerns, it doesn't look like the economy has hit the skids yet.
What does all this mean for future Fed interest rate moves?
That's the trillion-dollar question, isn't it?
I don't have a crystal ball, but I'll give it a shot.
It's possible that more interest rate hikes are coming.
I think folks expecting a quick pivot away from increases are going to be disappointed.
But any future rate hikes may be smaller and slower paced as the Fed takes stock of what the data is showing and works to keep us out of a recession.
Federal Reserve chair Jerome Powell has admitted that inflation has begun to fall but he wants to see "substantially more evidence" of a declining trend before changing policy.1
With inflation still three times above the Fed's 2% target, there's still a long way to go before we're out of the woods and back on the path.2
What could happen with markets?
I expect a lot of volatility ahead as markets digest every shred of information about the economy and the direction of interest rate policy.
I don't have a crystal ball here, either, but I think it'll be a rocky spring. So, I'm watching markets, I'm reading analyses and reports, and I'm looking for opportunities.
