Although the latest employment figures came in much stronger than anticipated, they ultimately confirmed what we had already suspected: the economy is decelerating. Employment data holds significant weight because, without consistent job creation, economic growth stalls.
On average, the economy needs around 200,000 new jobs per month to keep pace with population increases, which in turn helps sustain economic momentum. This is crucial because, as outlined in last week’s #BullBearReport, consumer activity makes up nearly 70% of total economic output. Consider the following:
“There is currently no indication that the economy is entering a recession. However, if you're trying to determine whether a slowdown could become a full-blown recession, one key element to monitor is consumer spending. Since it accounts for nearly 70% of GDP, all other components—from corporate investment to trade flows—ultimately depend on consumer demand.
Simply put, if consumers start to cut back on spending, companies are unlikely to invest in growth initiatives, hire more workers, or stock up on inventory. That dynamic is illustrated in the chart below, which compares Personal Consumption Expenditures (PCE) to employment trends and private sector investment
