The Pre-condition for a Fed Pivot is a Weaker Economy

Apollo Chief Economist

Layoffs in tech are being offset by hiring in Health care, Leisure and hospitality, Manufacturing, and the Government, see the first chart below. 

The second chart shows that job cut announcements have increased recently but remain at pre-pandemic levels. 

The bottom line is that the Fed wants to slow down hiring, and they will eventually succeed, but the labor market is not slowing down fast enough.

Once the labor market starts slowing, then the Fed will pivot. But the slowdown in the economy could be so fast that the pivot would be associated with a sell-off in credit and equities.

In other words, the pre-condition for a Fed pivot is a weaker economy. But a weaker economy means lower corporate earnings. Which means that a Fed pivot could result in a stock market sell-off and wider credit spreads.

Hiring is strong in the ex-tech service sector, manufacturing, and the government
Source: BLS, Haver, Apollo Chief Economist

US job cut announcements have moved up but remain at pre-pandemic levels
Source: Challenger, Gray and Christmas Inc, Bloomberg, Apollo Chief Economist

This presentation may not be distributed, transmitted or otherwise communicated to others in whole or in part without the express consent of Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”).  

Apollo makes no representation or warranty, expressed or implied, with respect to the accuracy, reasonableness, or completeness of any of the statements made during this presentation, including, but not limited to, statements obtained from third parties. Opinions, estimates and projections constitute the current judgment of the speaker as of the date indicated. They do not necessarily reflect the views and opinions of Apollo and are subject to change at any time without notice. Apollo does not have any responsibility to update this presentation to account for such changes. There can be no assurance that any trends discussed during this presentation will continue.   

Statements made throughout this presentation are not intended to provide, and should not be relied upon for, accounting, legal or tax advice and do not constitute an investment recommendation or investment advice. Investors should make an independent investigation of the information discussed during this presentation, including consulting their tax, legal, accounting or other advisors about such information. Apollo does not act for you and is not responsible for providing you with the protections afforded to its clients. This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any security, product or service, including interest in any investment product or fund or account managed or advised by Apollo. 

Certain statements made throughout this presentation may be “forward-looking” in nature. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking information. As such, undue reliance should not be placed on such statements. Forward-looking statements may be identified by the use of terminology including, but not limited to, “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology.