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- The U.S. jobs report was released for January and indicated that the U.S. added 353,000 jobs while the unemployment rate held at 3.7%. Additionally, wages increased 0.6% and on an annual basis by 4.5%. (Less positive was that the average hours worked fell to 34.1 in comparison to 34.3 of the previous month.) Other positive news about the U.S. economy is that productivity increased by 3.3 in Q4 of 2023 after increasing by 4.9% in Q3.
- The favorable jobs report follows the report of the previous week from the U.S. Commerce Department, which indicated that the U.S. economy grew at 3.3% (annualized basis) during Q4 of 2023 after growing by 4.9% in Q3. With the strong growth in the second half of the year, the U.S. economy grew at 2.5%, which compares to 1.9% in 2022. The recent data release was also favorable with respect to inflation. The personal consumption expenditure (PCE) price index increased by 0.2% and 2.6% on an annual basis. The PCE price index excluding food and energy increased by 2.9% on an annual basis, which is the smallest increases since March 2021. At the same time, consumer spending increased by 0.7% and incomes increased by 0.3%.
- Additionally, the final reading for January from the University of Michigan Consumer Sentiment Index that was released on Friday indicates that consumer sentiment reached 79.0 in January from 69.7 in December. The index is at the highest level since July 2021.
The flip side of the positive economic news is that the U.S. Federal Reserve has less urgency to cut interest rates. The Federal Reserve kept interest rates unchanged last week, and the Chairman of the Federal Reserve stated that a rate cut is unlikely for March. Other members of the Federal Reserve have indicated that there will be no rate cuts during the first half of 2024. In response, the U.S. Dollar Index ended the week at 103.92, up from 103.43 of the previous week and broke through the 200-day moving average. Additionally, China’s economy continues to struggle with high youth unemployment, price deflation, weak exports, coupled with a debt-laden real estate sector.
Furthermore, as we expected, the U.S.’ response (so far) to the recent attack on U.S. troops has been measured without direct confrontation of Iran, which reduces the possibility of oil flows being disrupted. And while, OPEC reduced production in January, it is still producing above target and there is still some uncertainty about how much Russia has reduced supply. As we expected, the Joint Ministerial Monitoring Committee (JMMC) of OPEC+ that met last week kept the current voluntary production cuts of 2.2 MMbbl/d in place. It is expected that OPEC+ will decide on the extension of the supply cuts in March.
About the Author: John E. Paisie, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.
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