US: Data shows no contraction in the economy - BBH

According to analysts from Brown Brother Harriman, the US economy hit a soft patch but is having a contraction. The NFP showed data that supports next week’s retail sales report.

Key Quotes:

“The US created fewer jobs than anticipated and the December gain was revised lower. However, the other details were favorable--better than expected. The unemployment rate ticked down to 4.9%, a new cyclical low, despite the rise in the participation rate (62.7% from 62.6%). Average hourly earnings were stronger than expected at 2.5%. The consensus expected a 2.2% year-over-year pace.”

“The income increase bodes well for consumption, and this will likely be seen in next week's retail sales report. We already know that auto sales increased sequentially.”

“Although there is more talk of recession in the US, this is still not the kind of data one associated with an economic contraction. That the US economy hit a soft patch is indisputable. However, this is not the same thing as a contraction. While we have doubted the Fed's four hike call, we think the market is similarly extreme in not fully pricing in a single hike this year.”