Morgan Stanley Economist on GDP, Trade War Impact, and Employment Data

Economic Outlook and Trade Policy

• 📉 Michael Gapen anticipates a weak headline GDP number, projecting around -1.4% to -1.5%, largely due to the front-loading of imports.
• 💡 The White House is signaling a desire to deescalate trade tensions, which Gapen believes is crucial for the economy and business sector.
• ⚠️ High-frequency shipping data indicates a collapse in trade volumes, particularly on trans-Pacific routes, suggesting a need for deescalation within 60-90 days.

GDP Components and Underlying Demand

• 📊 While the headline GDP may be weak due to imports, the underlying demand, measured by final sales (GDP minus trade and inventories), is expected to remain healthy at 2.5%.
• 📦 The front-loading of imports, while dragging down headline GDP, is noted as an idiosyncrasy in the data, with inventories not fully offsetting the import surge.

Employment Data and Forecasts

• 💼 The upcoming employment report is expected to show a slowdown, with a forecast of 160,000 jobs, though downside risk exists.
• 📉 Recent JOLTS data showing a significant drop in job openings in March suggests a potential slowdown in the hiring rate, which could lower the consensus forecast.
• ⚠️ The lack of real-time employment data makes forecasting challenging, with the actual employment report being the primary source of revelation for hiring rates.