Cooling, Not Collapsing: Lundh and Martin Read the Economy

**SPEAKER_1** (0:00)
Erik Lundh is with us, Senior Global Economist, The Conference Board, Scott Martin, Partner, Kingsview Wealth Management. Thank you both for being with us. So Erik, we've gotten in a slew of prints here. I know you wrote them all down. And so, you know, let's start with some of the most recent ones in the economic data and what they tell you.

**Erik Lundh** (0:20)
Sure. Well, I mean, so far, it's been a pretty good week.
We have ISMPMIs came out just a day or two ago. Those were down a touch, but they were still above 50 And they were above 50 for, I believe, it was the eighth consecutive month. So that's a positive read. Factory orders were out as well today. Those were up after two negative months. And so really, you know, most of the numbers that have trickled out of various agencies and the government have been fairly decent so far this week.

**SPEAKER_1** (0:54)
Yeah, understood. I mean, there was some concern on PMI that to your point, still showing expansion, still above 50, but things were slowing and that was something that one of my guests, Susan Spence, actually brought to my attention.
So I wanted to, but you make the right point, right? Still looking good there above the 50 mark. So what's the use, Scott?

**Scott Martin** (1:17)
I think Erik's right. I've seen the word meandering comes to mind, Nicole, when we look at these data points, I mean, same with the jobs market, you know, we're adding jobs, but we're at like, say, 50,000 ish every month, instead of, say, the 100 or 150,000, Nicole, that we'd like to see to keep up with the generally growing economy. And I think really this puts in perspective, in my opinion, where the Fed should be versus the rhetoric that we seem to be getting out of a working company, which Nicole, to me, tells me they need to wait for more data.
I don't think the data is convincing enough so far, besides the moves in the city open market, with the bonds, say, the 10 year and the 30 year certainly, in hiking up in yields or rates on its own. I don't think the Fed has enough data points here, Nicole, with regards to escape velocity or a crazy overheating economy that requires rate hikes at this point.

**SPEAKER_1** (2:02)
OK.
Erik, I know you're focusing on the jobs report for Friday. We've already gotten in a few prints. What do you think? What's important to watch? So we have a glimpse.

**Erik Lundh** (2:12)
Well, I'm going to circle back for just a moment. And I'm really going to agree with my fellow panelists. The Fed does not have enough information to make any kind of, you know, strong assertions about what's going to happen in September.
We have the job report coming out on Friday. Next week, we have PPI and CPI data, which is going to give us a more up-to-date read on inflation. So really, you know, looking towards Friday, I'm not expecting to see any major changes in the data. We did have a little bit of weakness in the last report following the end of the World Cup. There were some job hits in leisure and hospitality. We may see a little bit of a rebound there. So maybe something around the order of 50,000 or so for Friday. I don't really expect to see a change in the unemployment rate, but really, it's next week's data on inflation that are going to really be key in terms of the coming FOMC meeting.

**SPEAKER_1** (3:07)
Yeah, because the last couple for CPI, PPI we're showing inflation in the right direction, Erik, and then we had PCE, which made folks a little more nervous. So you think the Fed's going to be watching next week? I mean, it would be nice to see the trend of inflation still coming down a bit, right? For next week, we have the 11th, we'll have the CPI, and you mentioned the PPI as well. Just a quick thought for next week.

**Erik Lundh** (3:32)
Yeah, I mean, provided that trend holds, but also recall that we've had an escalation in some geopolitical volatility, at least. I know oil today is trading at 90 Of course, the print that we're getting next week is going to be backward looking, so it's not going to fully capture that.
Provided that we still see a moderation in terms of the second derivative, if you will, the rate at which it's increasing or decreasing, I think the Fed will be positioned to maybe set it out for another meeting. But if we see things really start to reaccelerate on the inflation front, especially given what Warsh said last week at Jackson Hole, we could see potentially a hike on the horizon.