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US overtime starts to slide

Although the US payrolls employment data remain robust, some straws in the wind suggest an imminent turning point.  The unemployment rate has stopped falling, and overtime hours in manufacturing have started to decline.  

The chart below compares the ISM (Institute for Supply Management) survey results for the whole economy (manufacturing and non-manufacturing) and overtime hours, both extreme-adjusted.  Manufacturing overtime hours is a sensitive (slightly leading) indicator of overall economic activity.  The fact that it's falling suggests that the US economy is slowing or will soon slow, despite the relatively robust employment data.

This does not mean that the Fed will stop raising rates, or, at least, it doesn't directly imply that.  When the slowing economy reduces core inflation, the Fed will stop this current rate cycle.  But that could be a few months away.  Inflation lags economic activity, though the lag varies from cycle to cycle.

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