Wealth Outlook 2024 - Slow then grow

Slow then grow Labor markets are poised to slow, stemming US rate pressures A center point of our Wealth Outlook is a sharper slowing in US employment in 2024 than many expect. Job gains in 2022-2023 exceeded GDP gains by the most since 1974. However, we believe this period of falling productivity – another anomaly from the pandemic era’s strange swings in demand and labor composition – is likely coming to an end. As FIGURE 8 shows, labor input is already slowing while productivity growth is rebounding. The US labor market is far more cyclical thanmost developedmarket economies, with relatively low barriers to hiring and firing. Consequently, USmonetary policy is alsomuchmore variable, constantly reacting to the state of employment ( FIGURE 9 ). As a contrast, consider that Japan has not changed its short-termpolicy rate significantly since 2008 (though that could be about — The US labor market has outperformed virtually all forecasts over the past two years, but a shift is likely to change – see our discussion of the prospect of yen strengthening in No. 8 of Our top 10 high conviction potential opportunities on page 54 ) . In 2023 to date, US employment gains have averaged 239,000 per month. While strong, this run rate is half the average of the same period in 2022. In October, those gains slowed to 150,000. We expect them to slow further in 2024. FIGURE 8 YoY change in US non-farm output per hour and hours worked YoY% change Recession Total hours worked Real output per hour 15 LABOR INPUT 0 LABOR OUTPUT 2006 2008 2010 2012 2014 2016 2018 2020 2022 18 Wealth Outlook 2024 | Our outlook Source: Haver Analytics through September 30, 2023.