Issue link: https://resources.envestnet.com/i/1533403
FOR HOME OFFICE AND ADVISOR USE ONLY. Economic Situation Let's now evaluate recent economic data and see if there's cause for immediate alarm. We know that government policies are rapidly shifting right now, but we'll use the latest available data to assess the economic impacts of tariffs and federal layoffs so far. We'll start with employment. Employment The US added 151k net new jobs in February. That figure slightly missed the 160k consensus estimate, and the unemployment rate edged up to 4.1%. The federal government shed 10k jobs last month with more cuts likely. Local and state governments are still adding employees, however. Education, healthcare, and financial services continue to hire, too, as are most industries. This was not a dreadful February payrolls report, and the most recent 220k weekly claims for initial unemployment benefits don't indicate a joblessness crisis. Unemployed people are staying out of work for longer this year than they were in March 2024, though. We see that continuing unemployment claims have risen in recent months, which is never good news. If the Department of Governmental Efficiency (DOGE) hits its layoff target of 300k federal employees, look for the unemployment rate to tick up another 0.2%. Additional job losses may occur at government contractors or at organizations that receive government grants. These secondary effects are difficult to predict, though. Inflation Both the CPI (Consumer Price Index) and Core CPI rose 0.2% in February on a monthly basis. Those increases were far lower than the 0.5% CPI and 0.4% Core CPI gains we saw in the January data. The CPI and Core CPI climbed 2.8% and 3.1%, respectively, on a year-over-year basis. Is a trip to the grocery store getting more expensive? Yes, eggs are now extremely pricey, but egg prices account for a tiny percentage of total CPI. The Food CPI is up 2.6% year-over-year, which is nothing terrible. A 4% plunge in airfare prices last month mattered more than the cost of making omelets. Grocery prices actually declined on a monthly basis in February if you exclude eggs! Shelter costs continue to drive the CPI, and especially the Core inflation rate. Shelter prices have largely quit falling, too, and the recent drop in mortgage rates won't help cool the housing market. That means Shelter CPI may not ease quickly for the foreseeable future. Core Goods prices rose 0.2% on a monthly basis but are down slightly since last February. This is the category where tariffs will be most obvious, although food and energy may have some material tariffs, too. Exactly what products face which tariffs seems to change daily, but we'll keep watching to see goods prices to jump. None of this economic news impacted the Federal Funds Rate Futures market very much. Interest rate traders still expect 2-3 Federal Reserve rate cuts this year. That prediction hasn't budged lately. 20250318-4330183