Job growth numbers have been strong, but not as strong as many economists anticipated early in 2021. Orlando believes some of the shortfall may be attributable to “significant problems with seasonal adjustments” at the Bureau of Labor Statistics, Orlando said. By the end of 2023, he says the unemployment rate is likely to reach its pre-pandemic lows of 3.5%.
All this should be good news. The fact that Orlando and others expect inflation to moderate this year is yet another positive. But with the economy reaching full employment only two or three years into the recovery, it leaves open the question when to expect the next recession. Orlando acknowledges it could come sooner than in the past three cycles, when expans lasted 7 to 11 years.
On the investment front, Orlando said Federated now favors international and value stocks in areas like energy, financial services, materials and consumer discretionary concerns. A year ago “we liked tech stocks but they got ahead of themselves,” he said.