Global Data Watch Goldilocks with wrinkles-110224110

Global Economic Research06 September 2024J P M O R G A Nwww.jpmorganmarkets.comEconomic and Policy ResearchBruce Kasman(1-212) 834-5515bruce.c.kasman@jpmorgan.comJPMorgan Chase Bank NAJoseph Lupton(1-212) 834-5735joseph.p.lupton@jpmorgan.comJPMorgan Chase Bank NANora Szentivanyi(44-20) 7134-7544nora.szentivanyi@jpmorgan.comJ.P. Morgan Securities plcMichael S Hanson(1-212) 622-8603michael.s.hanson@jpmchase.comJPMorgan Chase Bank NAManaging EditorMalcolm Barr(44-20) 7134-8326malcolm.barr@jpmorgan.comJ.P. Morgan Securities plcGlobal Data Watch•Maintaining soft-landing call amid US labor market slowdown… •…but shifting risks support cutting cycles (Fed to start with -50bp)•Inflation moves prompt policy action in Asia (BoJ hike, cuts elsewhere)•Up next: US Aug Core CPI (0.2%), ECB (-25bp)Goldilocks with wrinklesThe news this week is clear in its message: The US expansion continues to downshift while the global expansion remains on track but imbalanced. What this means for the outlook is less clear. We are inclined to view the latest data as consistent with our soft-landing call that sees sufficient supports to keep the expansion aloft, as inflation’s return to target green-lights an easing cycle that aligns rates with mid-cycle fundamentals. In the event, global and US growth are moderating now but will pick up as rate cuts gain traction in 1H25. Unfortunately, soft landings are as hard to track as they are to forecast, as a deceleration to a soft-landing looks painfully similar to a slide into recession. Navigating this path requires a risk management approach, which is underscored by the ongoing shifts in the risk balance assessments made by central banks in their forward guidance. The US is leading the global expansion, both in terms of its robust recovery as well as the latest loss of labor market momentum. Today’s reported 118k gain in private employment is disappointing. The anticipated bounce-back from perceived July distortions did not happen. Rather, a 62k downward prevision to the prior two months reinforces the signal of a slowdown. The %6m run-rate of private employment ticked down to 1.2%ar last month and is nearing the 1% threshold typically seen around recessions (Figure 1; 1.1% given the upcoming benchmark revisions). Although the unemployment rate edged down to 4.2%, the move was just 3bp unrounded and the real-time Sahm rule actually moved up further from 0.53 to 0.57 (now 7bp above the 0.5% recession threshold). Notwithstanding recession rules, we see resilience as the baseline given limited evidence of a broader break in behavior. A 142k gain in overall US payrolls is-1012345-2024681060 65 70 75 80 85 90 95 00 05 10 15 20 25%6m, saarFigure 1: US lab mkt recession indicators3mav less 12m minSource: BLS, FRED, JPM; Sahm rule based on real-time dataPrvt EmpSahmDashed:Recessiontrigger-6-4-202468-30-15015304518192021222324%3m (Sep $72/bbl boxed)Figure 2: Oil and global (ex-Chn) retail sales%3m/3m, saarSource: National sources, J.P. Morg