Macro Monkey Says
Core Day
JPow was banging out some crunches once again to close out last week as the Bureau of Labor Statistics dropped the latest core statistics.
Kind of like your grades this past semester, the results were pretty okay but still managed to disappoint. Let the underachievement reign.
Core PCE, which is required in media to always be followed with the descriptive phrase “the Fed’s preferred measure of inflation,” rose 4.6% annually in March. This represents a drop from the prior month’s revised reading of 4.7% but still disappointed markets as it was still hotter than the 4.5% economist anticipated.
Monthly, economists hit the nail on the head with a 0.3% gain from February. As this measure strips out the far more volatile food and energy price indexes, much of the decline was attributed to a slowdown in spending on goods.
Consumer spending was flat throughout March, but a partial shift in spending from goods to services takes the cake for driving the Core reading down last month. When we look under the hood a little bit, JPow’s face starts to sweat.
That’s because the underlying drivers of inflation – aka the sh*t that actually matters, like employment cost – continue to annoy the Chairman.
Wage earners saw their pay grow 1.2% for the first quarter, while compensation as a whole gained 4.8% annually. 1.7 jobs remain open for every unemployed American, a clear sign to Powell and his buddies that the labor market remains way too tight and that wage earners are just making way too much money.
According to the Fed, and don’t ask me which hat they pulled this figure out of, 3.5% annual wage growth is the target for consistency with 2% overall inflation. We’re still a long ways off, and while labor costs are moving in the right direction for the Fed, it might not be fast enough.
JPow is kind of like the driver of that lifted Ram truck with the literal sun for headlights that rides you like a piggyback in the middle lane of an otherwise uncrowded highway: he wants things to go faster but isn’t sure if making a move is the right way to do it, so he’ll just watch things closely.
Adding food and energy costs back into the equation, as these are the things we need to, y’know, stay alive in the 21st century, we get a 4.2% annual growth reading and 0.1% for the month of March, the slowest growth since last summer.
That means that food and energy costs are probably slowing faster than most other things you spend money on, at least for now. The indexes for these line items bounce around like Tesla when Cathie Wood opens her mouth, so we’ll see if that can hold true in April.
I just bought an 18-pack of eggs at Harris Teeter for $6.49 compared to the well over $7 they stole from me for the same eggs not too long ago, so fingers crossed we can keep the momentum.
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