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Employment and GDP… Implications For Coming Recession

January 10, 2023 by Paul Myers, Myers Capital Management

this past Friday the last unemployment report for 2022 was released, and it was mostly a positive report. JP Morgan, one of the Portfolio Strategists we utilize for client accounts, wrote the following this week about the anomaly of employment growth outperforming the economy last year and employment going forward may mean for 2023 and the potential of a coming recession….

The U.S. labor market was a shining star in 2022 against a dim economic backdrop of tighter financial conditions and recession fears. Although real GDP normally outpaces payroll employment, due to rising labor productivity, payrolls grew more rapidly than real GDP growth in 2022, flipping the script on this dynamic.

Real GDP growth averaged 2.02% per year from fourth quarter 1999 to fourth quarter 1999 2019, with payroll employment contributing .75% and output per job contributing 1.26%. However, after a pandemic-induced collapse in early 2020, fiscal stimulus and reopening allowed GDP to accelerate rapidly in the second half of 2020 and in 2021, while COVID fears, generous unemployment benefits and weak demographics held labor supply in check. As a result, payroll growth slowed relative to GDP growth. From fourth quarter 1999 2019 to fourth quarter 1999 2021, nonfarm payrolls fell by -0.97% annualized while GDP grew by 2.04% annualized, leading to a sharp surge in productivity among existing workers and a dramatic surge in job openings. As the economy slowed in 2022, some of this excess demand for labor was relieved. However, last week’s economic reports still showed a very high 1.83 job openings at the end of November for every person unemployed in the second week in December.

While we expect both job openings and job growth to fall in the months ahead, persistent excess demand for labor should result in continued job gains, moderate wage growth and a low unemployment rate well into 2023, helping the U.S. economy avoid a deep recession and, perhaps, avoid a recession altogether.

Filed Under: Myers Cap Post

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The Myers Cap Post

  • What’s In The Secure Act 2.0
  • Clark Capital Quarterly Economic and Market Review and Outlook
  • Inflation Cooled In December
  • Three Takeaways From 2022
  • Has the Inflation Beast Been Slain, and is There Another Beast Around the Corner?
  • Employment and GDP… Implications For Coming Recession
  • Economy Contracts In December, But Unemployment Drops
  • Merry Christmas!
  • Inflation Hurts Consumers, But Seems To Be Trending Down
  • Fed Raises Interest Rates Again
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Myers Capital Management, Inc. (“MCMI”) is a registered investment adviser located in Abington, PA. MCMI’s website is limited to disseminating general information about its advisory services and access to additional investment-related information, publications, and links. Accordingly, the publication of MCMI’s website on the Internet should not be construed by any consumer or prospective client as MCMI’s general solicitation to effect or attempt to effect transactions in securities or the rendering of personalized investment advice for compensation. We do not collect personally identifiable information about you when you visit our website unless you voluntarily provide it by sending us an email or other electronic communication(s). If you choose to share with us personal information, we will retain it in our electronic communications archive. Any subsequent, direct communication by MCMI with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. MCMI does not take any responsibility, representations, or warranties regarding the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, including website links. All such information is provided solely for convenience, guidance, and informational purposes only, and all users should be guided accordingly. Investments involve risk and, unless otherwise stated, are not guaranteed. This website and information are not intended to provide investment, tax, or legal advice and no warranties are implied. Before implementing any strategy, consult with a qualified financial adviser and/or tax professional. Insurance products and services are offered and sold through Myers Capital Management, Inc., and individually licensed and appointed insurance agents. For information about MCMI, please refer to the SEC’s investment adviser public information website at www.adviserinfo.sec.gov or upon written request from Myers Capital Management, Inc. No product or service is offered or will be sold in any jurisdiction in which such offer or solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. This web site is intended to be made available only to individuals in the United States, and the information on the web site is only for such persons. • Copyright Myers Capital Management, Inc.
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