One of the most important metrics for 2024, if not the most important, is going to be the unemployment rate. In the U.S., even after the rapid #ratehikes, only 3.7% of active population is unemployed. And it’s been running below 4% for 22 consecutive months, and if we exclude the pandemic hiatus, even more. This is key for several reasons: first, 2024 is an electoral year, and, in normal circumstances, people vote with their pockets, and as of today, and according to statistics, they’re full. Second, running a full employment economy with low inflation, is every central banker dream, and although everybody understand this is a very unstable equilibrium point, we can check that box too. Which means the Fed is in a good position to close the year and start the new one. Pressure is low. Third, #ratecuts will start on the back of a (meaningful) spike in unemployment above 4%. That’s the bogey. When that happens, pressure will rise, markets will react, and the Fed will be forced to act.
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