Skip to main content

Sit a Spell

On February 3, 2023, a headline by The Associated Press read, “A surprising burst of US hiring in January: 517,000 jobs.” On February 7, 2023, Business Insider stated, “A wave of layoffs that hit dozens of US companies toward the end of 2022 shows no sign of slowing down into 2023.” What gives? Confusion is evident from news of seemingly contradictory mass layoffs amid a hiring boom. What is the Federal Reserve’s role in all of this?

Relax. The dynamic has little to do with Fed policy. It is mostly COVID-19’s consumer goods boom and services deficit normalizing. Today, the economy remains a bit overheated from pandemic spending but cooling is on the way.

According to an analysis of U.S. Bureau of Labor Statistics, data from June 2022 to October 2022 by outsourcing firm Outsource Accelerator; jobs gained are in the areas where jobs were most lost during COVID-19, i.e., restaurants, nursing homes, child-care centers. Job losses are in areas representing mostly pandemic-related impacts whose surge is reversing, i.e., big tech, biotech and arts, entertainment & recreation. Beyond these, some losses are beginning to show up due to Fed tightening, i.e., construction, professional and business services.

Our estimates are that the large interest rate increases during the summer of 2022 will require an estimated 29 months (late 2024) to reach peak impact and deliver the lowest readings on economic activity (see Robinson Value Management’s Fourth Quarter 2022 “Long and Short of It”). The most visible phase of slowing growth should come before that, roughly late 2023 to early 2024. By mid-2024, the Fed likely will have begun to reverse course and loosen. The early impact of that loosening may already be evident by late 2024.

The future is uncertain, but economic cycles are as certain as taxes. Inflation could remain resilient as China reopens its economy. The Russia/Ukraine war could further add to pricing pressures. However, the Fed will continue to pursue its mandate and eventually win the inflation battle. Uncertain is the timing and the degree of slowing in the real economy (unit volume declines) required to achieve this mandate. While changes to the economy are typically slow and evolving, expectations and asset prices can move rapidly. If a recession transpires, markets may quickly adjust to the data creating volatility, pain, and perhaps, opportunity.


This post is furnished only for informational purposes and contains general information that is not suitable for everyone. The information herein (or attached hereto) should not be construed as personalized investment advice or considered as a solicitation to buy or sell any security. Investing in the stock market involves gains and losses and may not be suitable for all investors. There is no guarantee that the views and opinions expressed in this newsletter will come to pass and there is no assurance that any investment strategy will be successful. Diversification does not ensure a profit or guarantee against a loss. Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. It is also subject to change without notice.
Please contact Robinson Value Management, Ltd. if there are any changes in your financial situation or investment objectives, or if you wish to impose add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Form CRS and the Brochure and Supplement of Form ADV which are available for your review upon request.
Indices are not available for direct investment. Investment in a security or strategy designed to replicate the performance of an index will incur expenses, such as management fees and transaction costs, which would reduce returns. Past performance is not necessarily indicative of future results. For additional information on Robinson Value Management, Ltd. (“RVM”), please contact us for a current copy of our firm brochure or our client relationship summary (or click here for the Brochure and here for the CRS). Additional information regarding RVM and its principals is available on Investor.gov/CRS.
Robinson Value Management, Ltd. (“RVM”) is an independent investment management firm, not affiliated with any parent organization. RVM is a registered investment adviser and serves both individual and institutional clients. RVM claims compliance with the Global Investment Performance Standards (GIPS®). GIPS is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a complete list of all composite descriptions and/or a complete GIPS compliant presentation, please call (210) 490-2545, email info@robinsonvalue.com, or go to our web site at www.robinsonvalue.com.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute. CIMA® and RMA® are registered certification marks of the Investments and Wealth Institute. Other third-party marks and brands are the property of their respective owners.