Chart of the week: so far so good

Data-driven insights and analysis from our investment team every week.

Recent economic data releases from the US have given mixed signals. Sentiment has been weakening, but actual economic activity has been stronger than the sentiment indices have suggested. Many forecasters, understandably, have given the sentiment data more weight, as the actual activity could be being bolstered by front-loading of demand before tariffs start to bite. Hence, there is still a heightened fear that the US economy could stall in the second half of the year.

We do not dismiss these fears, but there is one area that we do not think can be bolstered by front loading due to tariff uncertainty and that is the labour market. Indeed, if corporate fears were elevated due to tariff uncertainty, one would expect hirings to be down and the labour market to show some stress. However, if we look at the chart below, which shows the monthly hiring rates from US corporates, there is little sign of stress. Current hiring rates are not as strong as they were in 2023, but they are not much different to the average in 2024 when there was no prospect of tariffs. Thus, while the imposition of tariffs should lead to some degree of slowdown we believe there is sufficient momentum in the economy to make that slowdown manageable.