There's Not Going to Be a Sharp Downturn in Jobs, Says Lakshman Achuthan

The Federal Reserve faces persistent pressure as the labor market remains resilient despite recent soft economic reports. While headline data suggests a slowdown, cyclical sectors like trade and transportation are showing increased hours worked and firming growth, indicating that a significant downturn in employment is unlikely in the near term. This "K-shaped" recovery creates a stark divide where wealthy consumers sustain the economy while lower-wage earners face negative real wage growth due to inflation. Although high interest rates and 7.5% mortgage costs are beginning to impact housing and aggregate wealth effects, the long and variable lags of monetary policy mean the full economic bite has yet to materialize. Consequently, market expectations for a pivot to lower yields may be premature, as nominal growth and sticky inflation suggest that higher interest rates will persist throughout the current cycle.