The moderation in U.S. payroll growth in 2019 likely reflects a maturing labor market—one that is reaching full employment. But where does this leave Fed policy?
We are skeptical of the signal from the yield curve now given the likely distortion from non-U.S. as well as U.S. QE and negative bond yields in much of the world.
The case for rate cuts is much weaker now than in previous mid-cycle Fed easings.
The latest data, and still-accommodative financial conditions, suggest the Fed does not have to cut rates aggressively.
The problem with the recovery from the global financial crisis is not just lower growth rates, but still-depressed levels of activity.
While the United States fights a futile trade war with China, the rest of the world loses.
U.S. GDP growth may seem weak relative to previous expansions, but it is unsustainably strong relative to potential.