Economists are continuing to question the validity of the historical economic reports which have been used for decades to forecast the future of the financial markets. The Chicago Fed just came up with a new unemployment model called CHURN, which stands for “Chicago Fed Unemployment Rate Nowcast”. They came up with this model as an answer to the felt frustrations over the inaccurate Bureau of Labor Statistics reports that are published every month.
Years ago, when the ADP report was first published, there were huge monthly variations in the findings as well as gigantic discrepancies compared with the established BLS findings. At the time, the question was which one was more accurate, ADP or BLS. Over the last 15 years, the variance between those two reports has lessened significantly, and both are now considered reliable indicators. It will be interesting to see the correlation, or lack thereof, among the now three models measuring unemployment. And don’t forget about the U6 number (also a BLS calculation which currently sits at 8.1%) and the Labor Force Participation rate, which many financial analyst prefer model best.
Jerome Powell is set to speak at a Chamber of Commerce luncheon today. His comments, of course, will be carefully scrutinized. Powell will likely discuss inflation concerns and labor market trends. He has previously mentioned that the labor market is “no longer solid” and that job growth has dipped below breakeven. I saw a chart on Saturday that confirms this later statistic. Alarmingly, for the first time in six years, there are more people looking for work than there are available jobs. Markets are pricing in a strong probability of two more Fed rate cuts in 2025, with a 75% chance of a 25bps reduction. Powell’s comments may provide insight into the Fed’s future monetary policy decisions.
And on Friday, we will see the Fed’s favorite measure of inflation, the Personal Consumption Expenditures, which is expected to rise 0.2% month over a month and 2.8% year over a year.
