Observations: R U rethinking r*?

The pattern in US data is unmistakable

January nonfarm payrolls put an explanation point on recent US data that have confounded markets’ expectations for the Fed to cut rates rapidly this year.  For nearly four years running, I have expected higher US rates than markets and still do.  At some point, markets – and, of course, the Fed – are going to have to think more deeply about why they keep getting the economy, and thus rates, wrong.  If you, too, expected early and significant rate cuts this year, maybe it’s time for you to rethink r*, the economy’s neutral real interest rate.

Here is a quick update on my current views on the US economy, in between Leitmotifs in the May you live in interesting times series.