Bilal’s Macroscope: 10 Important Charts to Consider Heading into Year-End
- By Bilal Hafeez
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This month has seen volatile, whiplash price action in the US rates space, as the market moves towards the notion that the Fed tightening cycle has come to an end.
Our view is that we still haven’t seen peak US yields, and that the recent rally in US bond markets will retrace in the coming months.
As we head into year-end, here are 10 important charts.
Everyone Expecting Lower Yields
Across both the 2-year and 10-year segments of the US curve, the broad consensus is that US yields will fall more aggressively than market forwards currently suggest (Chart 1).
Moreover, the market has been pricing Fed eases much earlier than in the past (Chart 2).
Employment Growth Slowing
Employment growth in the US is slowing, with both the 3-month and 6-month moving averages trending lower (Chart 3).
At the same time, hours worked have remained stable throughout 2023 (Chart 4).
Unemployment Remains Near Record Lows With Imbalanced Labour Market
Despite ticking higher in recent months, the unemployment rate remained near the post 1970s lows (Chart 5).
Even with encouraging unemployment levels, there are several job sectors that have below-trend payroll levels, including nursing, accommodation, and food services (Chart 6).
Core Inflation Remains Elevated
Even though it has fallen this year, US core CPI remains elevated (chart 7).
Lower energy prices have dragged headline inflation lower in 2023 (Chart 8).
Like energy prices, goods prices have also slid materially this year (Chart 9).
Despite the drop in energy and goods prices, services inflation remains elevated and far above the Fed’s 2% target for the aggregate inflation measures (Chart 10).