We continue to believe that the labor market is weakening due to tight Fed policy which has caused a recession in housing and construction.  Expectations are for 59k private payrolls growth so we see risk to the downside but the labor report is very unreliable with huge revisions over time and the shutdown has made this worse, creating a great deal of uncertainty around the Friday announcement.

We are very bullish about inflation declining to the arbitrary 2% target this year  as the massively delayed shelter component of inflation finally reflects market rates and we roll off very high PCE prints in January and February of 2025.   We forecast that PCE core inflation with roll down to 2.4% after the first quarter of 2026  and decline to 2% by the end of the year as shelter inflation rolls down throughout the year.  Money supply growth is down over 6% year over year, and oil prices...

Tariffs are extremely unpopular with the public and are highly regressive taxes. We estimate that tariffs will raise over $400 billion in revenue in 2026 which is over 1.3% of GDP.