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.

2023. Stagflation After Failed Stimulus.

After more than $20 trillion in stimulus plans since 2020, the economy is going into stagnation with elevated inflation. Global governments announced more than $12 trillion in stimulus measures in 2020 alone, and central banks bloated their balance sheet by $8 trillion.

The result was disappointing and with long-lasting negative effects. Weak recovery, record debt and elevated inflation. Of course, governments all over the world blamed the Ukraine invasion on the inexistent multiplier effect of the stimulus plans, but the excuse made no sense.

Commodity prices rose from February to June 2022 and have corrected since. Even considering the negative effect of rising commodity prices in developed economies, we must acknowledge that those are positives for emerging economies and, even with that boost, the disappointing recovery led to constant downgrades of estimates.