U.S. Economic Growth Update

Trumping, not Trumped

Despite the constant barrage of headlines surrounding President Trump's administration, the U.S. economy continues to show remarkable resilience and continues to outperform expectations.

• NFP came in at 143K (below expectations but roughly still at replacement /break-even rates).

• U3 ticked down to 4%.

• November and December of last year had a combined positive 100K job revision.

This is the noise everyone has already heard. Additional noise is found in the annual revisions to both the Establishment Survey (“NFP”) and the Household Survey, which informs the unemployment rate.

First, recall a U.S. Economic growth update, published on June 20, 2024, where a discrepancy between booming NFP prints and an increasing U3 rate was observed. This observation allowed for the fading of the Sahm Rule growth scare last summer. Dips were bought. Money was made.

“Despite the economy rebounding in 2023 and into 2024, the labor market has continued to cool as measured by the unemployment rate.

Pinebrook’s view is this is due to the sudden and disproportionate jump in the size of the prime age labor force.

In other words, the number of unemployed, and the unemployment rate, have continued to grow despite growth in the overall economy.

To be clear, these data sets are noisy. But if we go with the idea that the Household Survey has been under counting prime working age population growth, it will solve for the divergence between booming NFP prints and a rising U3 rate”.

The aforementioned annual revisions have validated the conjecture of summer 2024.