with Brian Beaulieu


This week on Fed Watch, ITR Chief Economist Brian Beaulieu compares US employment data to consumer sentiment measured in a recent household survey and highlights the latest CPI, PPI, and inflation data. Is the Fed still on track for cuts in September? Tune in to find out!

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Key Episode Takeaways

  • 0:54 – Analyzing recent US employment data
  • 1:44 – Differences between official employment data and the household survey data
  • 3:02 – Reviewing CPI, PPI, and inflation data
  • 5:22 – The Federal Reserve is still on track for September interest rate cut
  • 6:11 – Tune in to our July webinar on the 2030s depres

The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.


Hello, I’m Brian Beaulieu. Thank you for this June 14th edition of Fed Watch. Last Friday, there was a lot of news generated because of the employment numbers. I just wanted to put a little perspective on that.

You know, the 1/12 rate of change was 1 .8%. So it may have sounded like a really big number the way it was portrayed, but that 1 .8% a year will be a growth rate. And that’s even using the government’s seasonally adjusted numbers.

It was really normal. I mean, that’s what we’ve been running after the last three to four months. And that’s down from prior quarters. So it wasn’t nearly as shocking to us anyways, as apparently it was to other people.

And then that got me curious, I dug down even deeper. You know, if you get our ITR trends report, the number that’s published in the media is just a subset of the overall private sector, non -firm employment.

So we, we look at that broader number and that’s showing a 1 .6% rate of growth as opposed to that 1 .8 and between the end of the great recession and COVID that tended to run at 1 .9%. So again, that doesn’t seem real hot to us.

It seems normal. And given that the Fed’s been trying to slow down the economy, normal is noteworthy. But then because tend to be a curious little economist, I did some more digging in, you know, they also survey households to find out how they are doing, whether they’re working or not.

And there with the household survey, the 1/12 rate of change, instead of being 1 .6% was only 0 .2% and the 3 -12 was very low at 0 .3%. They’re all in phase C, all the rates of change. So that’s sort of the consumer, you know, we’ve been reading, hearing the consumer seems to not be nearly as happy as the official statistics.

And I think we’re seeing that in these employment numbers. And, you know, when you furlough somebody, they remain on the payroll. So they’re still counted as employed by the company, but the person on the other end of the survey from the BLS may be thinking, well, no, I’m not working.

So that could be a difference. And also, if you reduce somebody’s hours, they’re still on the payroll and is therefore going to be counted that way. But to the person who is on the other end of the survey as a household, they may be feeling totally different.

So I think that’s an important tell because that could be how they are going to be moving forward over the next quarter, maybe longer. In fact, instead of looking robust from the April to May transition, the household survey showed a very unusual decline in employment, both seasonally adjusted and not seasonally adjusted.

So it’s something we’re going to keep our eye on. I just don’t want you to think that the employment numbers are clearly indicative of a whole lot of strength coming at us. Not so sure that’s true. CPI data came out and that showed relatively consistent rate of change, 3 .3%, I think it was, no change on the 1/12, 3 .3% on the 12/12, still above what the Fed wants, but both rates of change are still in phase C.

Core CPI tends to run a little bit harder right now. It’s at 3 .4%, but it eased and we should keep in mind last year is at 5 .3%. It continues to be a service sector problem, and that means a wage problem.

Commodities were actually down in terms of the consumer price index, at least down in terms of the rate of inflation. There’s electricity, that was up 5 .9%. That’s something to keep an eye on, by the way.

That’s going to be an ongoing issue. You know how ITR is projecting ongoing inflation through the rest of the decade after this slowdown period in inflation? Electricity, we think, is going to be an important part of that.

Rents and rental equivalencies or current insurance, household insurance were up. These are all things that ding discretionary income. Not disposable income, which is after -tax income, but your ability to go out to the movies or go out to dinner, if you’re paying more for your electric bill and car insurance, et cetera, it begins to take a toll on.

The PPI was also out this week, and that showed a decline from April to May. It declined 0 .2% for the month. Goods were down 0 .8% from the prior month. It continues to be, as we’ve been talking about, services and wages that are keeping even the producer price index up.

Core PPIs at 3 .2%, so a little bit lower than the consumer price index core, and that’s a good sign, too. It means it’s easing in the right direction. What does all this mean? It means we think we’re still on track for the September decline in rates.

I know in the June 12th FOMC statement that they were doing their usual hedging and hawing really is gonna be a function of what the retail sales numbers and travel numbers look like this summer. There’s lots of anecdotal evidence out there from people that I talked to that, again, what people are feeling and what they’re seeing are different than what the official numbers are portraying for whatever reason.

So it depends on how soon the reality flows through into the data, eventually it will. So hold on for that rate increase. I want to count on a whole lot of decline, as we’ve talked about before, where we’re getting those positive leading indicator signals for the economy in 2025, and that’s gonna make for a very short, brief window of interest rate decline.

Use this period to figure out how you are going to cope with rather relentless ongoing inflation, particularly in the post 25, 26 period, it’s gonna get nasty. If you want to know more about our long -term view of inflation and what that means for interest rates in the economy, Alan and I are doing another webinar together on July 25th, 2024.

We only have two more times where he and I are going to be on the same stage at the same time. So I hope you can join us for July 25th, where we talk about the long -term processes, stresses, decisions you’re gonna have to make between now and the end of the decade.

That’s primary focus of this coming webinar. Thank you for joining us for this edition of Fed Watch. We’ll see you next week.