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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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Jacob Snyder
Lee Lichterman III
To: ajtj99 who wrote (56421)4/7/2022 12:33:27 PM
From: ajtj992 Recommendations  Read Replies (1) of 97932
 
GS with an interesting take on the tight labor market:

The jobs-workers gap, which measures employment plus job openings minus the labor force suggests the labor market is significantly overheated both in absolute terms and relative to the population. Given that the 5-6% pace of recent wage growth is also likely broadly inconsistent with the Fed’s inflation target, we think GDP growth may need to slow to the 1-1.5% range, even weaker than our below-consensus 2022 forecast of 1.9% (on Q4/Q4 basis), to restore balance to the labor market.

That said, we believe a recession is far from inevitable as previous episodes of labor market overheating didn’t have a source of incremental labor supply comparable to the 1-1.5mn prime-age workers that may be poised to return to the workforce, and few of the financial imbalances that made the US economy vulnerable to self-feeding recessionary forces in the past are visible today, which is reflected in market’s somewhat sanguine pricing of near-term recession risk.

But we do think Fed officials could decide that a larger tightening of financial conditions is desirable to generate a more negative growth impulse, which we believe suggests upside risk to our terminal funds rate forecast of 3-3.25%, especially in light of the limited traction that the Fed’s hawkish pivot has had so far.
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