Forward Guidance Breaking Down The Current Business Cycle | Eric Basmajian
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Oct 22, 2024 Eric Basmajian, founder of EPB Research and an expert in macroeconomic forecasting, dives into the intricate world of the business cycle. He reveals how the cyclical economy affects everything from GDP numbers to the housing sector. The discussion explores labor market dynamics, emphasizing jobless claims and the gig economy's impact. Basmajian unpacks the complexities of non-farm payrolls and revisions, while also tackling the Federal Reserve's neutral rate and its implications for monetary policy.
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Unusual Lag in This Cycle
- This business cycle follows a normal sequence of leading to cyclical to aggregate sectors.
- However, this cycle has an unusually long lag between leading and cyclical contractions.
Backlogs Explain Lag Time
- Production backlogs, especially in construction and motor vehicles, explain the long lag time.
- These backlogs masked the impact of rising interest rates on cyclically sensitive sectors.
Cascading Effects of Cyclical Sectors
- Highly cyclical sectors like auto manufacturing have a cascading effect on the broader economy.
- Job losses in these sectors trigger reduced spending in other areas, leading to an overall downturn.