Some recent research from Goldman Sachs on the state of the U.S. labour market make for interesting reading – on the Federal Reserve Board’s Labour Market Conditions index (FRB’S LMCI), on the Kansas City Fed’ Labour Market Index and on the extent of slack available in US labour market. The upshot of all this is that the US labour market can create additional 800,000 to 1.4 million jobs (medium to long-term) and not just 500K jobs before labour market slack vanishes. Therefore, the Federal Reserve can wait to hike interest rates. At the same time, the labour market is not slowing, as flagged by the FRB’s LMCI.
Message: Expansion is good. It is healthy. Equities can continue to make new highs. But, please do not tighten. There is plenty of slack. The expansion is ‘only’ six years old. Do not spoil the ‘asset bubble party’, please.
A lonely voice, say TGS: What about financial market conditions?
Possible Response: Don’t be silly.