Buckle Up: Higher For Longer = Hard Landing
I was skeptical of the so-called "Wile E. Coyote" moment narrative for the US economy. "Was," past tense. I'm tentatively on board with it now.
On innumerable occasions looking back 12 or so months, I suggested a "sudden stop" scenario was unlikely, mostly because firms were still having a lot of trouble sourcing workers, which suggested demand was still a semblance of robust.
The labor market is (famously) a lagging indicator, but the pace of hiring last year (and even into 2023) meant that
Higher for longer might indeed lead to a hard landing, at first solely an economic one with the expected decline in risk assets, but the real hard landing will occur if the economic recession arrives just in the middle of the presidential election cycle, helping Trump return to the WH. A hard landing leading to a calamity, where the yield on the 30 year bond sits at that juncture will be the least of our worries.
The gop is certainly planning to wreck the economy before the election.
So many variables to consider when trying to guess the future of the US economy. Here is yet another one to consider;
The WSJ published an article today titled, “Rebound in Immigration Comes to Economy’s Aid” which covered :
“the rise in foreign-born labor force boosts worker supply, eases wage pressure and aids Federal Reserve’s goal of ‘soft landing’”.
These two paragraphs got my attention (in a good sense – as our country desperately needs workers and, at the same time, we can help people who have the personal resolve to physically make it to our borders with the goal of working to improve their families lives).
“This year, average monthly growth in the foreign-born labor force is about 65,000 higher compared with 2022 on a seasonally adjusted basis, a Goldman Sachs analysis found. After plunging at the start of the pandemic, the size of the foreign-born labor force has rebounded, nearing 32 million people in August.”
“Foreign-born workers’ share of the labor force—those working or looking for work—reached 18% in 2022, the highest level on record going back to 1996, according to the Labor Department. It has climbed further this year to an average of 18.5% through August, not adjusted for seasonal variation.”
Congress needs to update legislation to provide a legal pathway for immigrants to live/work in the US.
WSJ only a month behind me on that GS piece: https://heisenbergreport.com/2023/08/28/the-us-labor-market-is-normalizing-thank-immigrants/
They’re getting faster!
I totally agree. Sadly, folks like the Great White Hope Ronnie DeSantis do not. Let’s see how those needed flows hold up if our GOP gets to follow through with proposals to order “shoot to kill” border enforcement as well as invading northern Mexico in the name of stemming drug flows. It would be very tempting for a Mexican government to retaliate by stopping their measures to reduce the flow of migrants from Central America or elsewhere.
Someone placed a large SOFR June/24′ call a year ago.