A “Strong No” to Stagflation in a Dynamic Labor Market: PNC Asset Management CIO

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Investor concerns about the health of the overall economy have been temporarily eased after last week’s sharp rise employment report for the month of March. However, questions remain about the true strength of the economy amid slowing growth and resulting fears of stagflation.

According to Amanda Agati, chief investment officer of the PNC (PNC) Asset Management Group, the answer to the question of impending stagflation is a “categorical no”.

“You just have to admit that the job market here is very strong and very healthy,” Agati told Yahoo Finance Live. “Yes, there is still room for recovery from here, but certainly very tight. And so, in a stagflationary environment, we generally see a much weaker labor market and jobs than what we see today.

And while Agati doesn’t think the circumstances look dire enough to start sounding the stagflation alarm, she does acknowledge that markets are entering a state of slowing growth.

“So, yes, we are in a slowing phase of the cycle expansion. We have to be honest about that,” she added. “The rate of change is certainly slowing down, but with a report on the such strong employment and a tight labor market, I don’t think we can say it’s stagflationary any time soon here, and certainly not from today.”

Agati joined Yahoo Finance Live to discuss stagflation and the labor market in light of March’s strong jobs report. PNC Asset Management Group, a member of The PNC Financial Services Group, Inc., is a relationship provider of investment, planning, banking and trust services to institutions and high net worth individuals.

The March payrolls report saw non-farm payrolls rise to 431,000 from an expected 490,000 and an upward-revised 750,000 in February. The jobless rate, however, was weaker than expected at 3.6% – down 0.2% from February’s 3.8% – from an expected 3.7%, marking the 15th consecutive month of unemployment. expansion of the American labor force.

Growing fears of stagflation

Investors are increasingly worried about the consequences of sustained inflation and the actions of the Federal Reserve to combat it. Investing legend Bill Gross, best known for co-founding PIMCO, recently warned of the possibility of stagflation over the next few years. The FOMC will meet again from May 3-4as the next round of rate hikes should further curb the price spike.

“It is difficult to say that anyone is unscathed. I mean, we are definitely seeing widespread price increases across the board,” Agati said. “And so it’s definitely a sustained inflationary environment. We had hoped at the start of the year that we would start to see now more supply chain standardization to help take some of the inflationary fire off the canvas. Clearly, this is not materializing at all.

Agati thinks the first-quarter earnings season will be particularly telling of how companies and the broader market deal with high prices.

“We are sitting at profitability levels that are essentially at cyclical highs, if not record highs,” she added. “And so, the key will be, will companies have been able to pass or continue to pass price increases and maintain that profitable backdrop? Or are we going to start to see that pinch kick in during earnings season?”

Thomas Hum is a staff writer at Yahoo Finance. Follow him on Twitter @thomashumTV

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