U.S. Exceptionalism and Declining Export Prices

Jeffrey Roach (00:08):

Hi, I am Jeffrey Roach, Chief Economist for LPL Financial with three key talking points for this current macro landscape. First, the job market is an important ingredient for growth. We think quarterly growth in 26, we'll stay above 2% each quarter, but a big risk to growth in 26 is the warning signs we have from the job market. Despite a consensus view that we have labor supply problem, our view is that we have more of a labor demand problem. Job openings are low, that's the demand side, and unemployment remains low. That's the supply side. If labor supply were short, firms would have many more job openings and push compensation higher, but that is currently not the case. Perhaps both sides cancel out, but either way, job growth is expected to deteriorate. Further, average monthly gains in 26 will likely hover around 40,000 per month. Second, U.S. exceptionalism shows up in high productivity numbers.

Jeffrey Roach (01:05):

Productivity, that's the amount of output produced per hour worked, is a critical determinant of long-term economic growth. This chart here shows that the U.S. has experienced exceptional productivity gains compared to other advanced economies. Data from the Conference Board highlights the remarkable productivity surge in the U.S., Setting it apart on the global stage. Specifically, the data indicate that the U.S. has consistently achieved productivity growth that exceeds the rates of major peers across Europe and Asia. Here we see some support the U.S. exceptionalism thesis. Third, inflation pressures offset by declining import prices. Given the U.S. market is one of the biggest in the world, foreign firms are keen on keeping market share. In the months following April 2nd, several countries have cut prices for U.S. purchasers. Recent declines in import price index for Canada, China, several European economies, including France and the U.K. signal broad-based easing and traded goods cost pressures, which provides a more supportive backdrop for U.S. inflation. Now, importantly, the U.S. data here implies that part of the decline stems from foreign suppliers absorbing those tariff related costs. In effect, that's consistent with Fed regional analysis, showing evidence that foreign exporters have trimmed prices to sustain access to the U.S. market. Now taken together, falling import prices will reduce domestic cost pressures, building that construction and constructive macro environment. That's all for now, and if you want more insights on global market trends, follow us on social media and take care.