Navigating the Macro Landscape: Don’t Fear DeepSeek

Dr. Jeffrey Roach, Chief Economist at LPL Financial, discusses labor markets, business trends, and AI advancements.

Last Edited by: LPL Research

Last Updated: January 29, 2025

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Jeffrey Roach (00:05):

Hi, I'm Jeffrey Roach, Chief Economist for LPL Financial, with three key takeaways for the current macro landscape. And the first one's this: labor markets are at a crossroads. One factor the Federal Reserve considers when adjusting policy is the labor market trend, and each Thursday morning investors get the latest read on how many filed for unemployment insurance benefits. This chart here shows the positive relationship between the official monthly unemployment rate and the weekly insurance filings. Given the weekly rise in those continuing to claim those insurance benefits, we should expect an increase in the unemployment rate over the next several months. Now, don't overreact to a likely uptick in unemployment. The economy will still likely grow close to trend in Q1, but could dip below trend if the job market softens faster than expected. Second, businesses are holding steady. The latest from the conference board tells us job opportunities are not as plentiful in January.

Jeffrey Roach (00:58):

Now this is not across the board since some sectors such as healthcare and manufacturing are hiring above trend. I'm showing in this chart the conference board's labor differential, which are those reporting job opportunities as plentiful minus hard to get, and that index is trending lower. The key takeaway here is business expectations are still good, but moderating off the near-term highs, we should expect the Fed will be looking at these job market indicators for guidance as they set policy throughout the year. Third, don't fear DeepSeek. DeepSeek is a Chinese artificial intelligence company that recently created a platform to compete with other AI models. For those who value free market economics and fair competition, we should look at this as an AI accelerator. We now know that AI models could use much less computing power than we thought just a few months ago. Just like the space race of the sixties and seventies, the AI race will challenge conventional thinking, accelerate AI adoption, and sharpen the development of these tools, which will ultimately give a much needed boost to productivity. Well, that's all for now. If you want more insights on global market trends, follow us on social media and take care.

 

Dr. Jeffrey Roach, Chief Economist at LPL Financial, discusses labor markets, business trends, and AI advancements.

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