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We discuss:

• Macroeconomics
• Markets
• Monetary Policy

The latest jobs report in the United States shows strengths and weaknesses. Total nonfarm payroll employment increased by 223,000 in December, and the unemployment rate fell to 3.5 percent. However, the United States job market continues to show negative real wage growth, the employment-to-population ratio is 60.1 percent, and the force participation rate is 62.3 percent. According to the BLS, both measures have shown little net change since early 2022 and each remain 1.0 percentage point below their values in February 2020.

The United States jobs figures are constantly dissected by analysts and there is a healthy criticism in independent research which certainly helps enormously when it comes to understanding the health of the labour market. However, in the European Union things are much worse.

The IMF has warned about the optimistic estimates for 2023, stating that it will likely be a much more difficult year than 2022.

Why would that be? Most strategists and commentators are cheering the recent decline in inflation as a good signal of recovery. However, there is much more to the outlook than just a moderate decline in inflation rates.

Inflation is accumulative, and the estimates for 2023 and 2024 still show a very elevated level of core and headline inflation in most economies. The longer it remains this way, the worse the economic outcome. Citizens have been living on savings and borrowing to maintain current levels of real spending. But this cannot be last for many years.

In 2022, central banks will have purchased the largest amount of gold in recent history. According to the World Gold Council, central bank purchases of gold have reached a level not seen since 1967. The world’s central banks bought 673 metric tons in one month, and in the third quarter, the figure reached 400 metric tons. This is interesting because the flow from central banks since 2020 had been eminently net sales.

Why are global central banks adding gold to their reserves? There may be different factors.

Most central banks’ largest percentage of reserves are US dollars, which usually come in the form of US Treasury bonds. It would make sense for some of the central banks, especially China, to decide to depend less on the dollar.