As we close out 2023 it’s useful to reflect on the things we got right and the things we got wrong. I was wrong about the US economy.

On July 5, 2022, the yield curve between the two-year and ten-year Treasury notes inverted and I was certain the US economy would slip into recession. Yield curves become inverted then the interest rate for short-term loans becomes higher than the interest rate for long-term loans. Typically, an inverted yield curve is followed by recession, but this time appears to be different.

There are no signs the economy is headed to recession, or even slowing down. In fact as recently pointed out in a WSJ Article, “A year ago, everyone from the strategists at Wall Street banks to rap artist Cardi B was calling for a recession. Instead, inflation continued falling, consumers kept spending and the unemployment rate fell to 3.4%, the lowest level since 1969.”

So, what should we expect for 2024? Clearly, I have no idea!

My best guess, inflation...

ADP Nonfarm Private Payrolls missed consensus estimates … by a lot.

The January ADP National Employment Report posted an unexpected 301,000 decline in nonfarm private sector payrolls, the first monthly decline in just over a year. Consensus estimates were for a 210,000 increase in January payrolls.

Making matters worse, the December increase in payrolls was revised down from 807,000 to 776,000, while the November payrolls increased 496,000, revised down from 505,000. ADP suggests the decline was "due to the effect of the Omicron variant."

While the decline was a huge miss, what’s more concerning is the trend. The November and December downward revisions suggest the economy is weakening. It’s too soon to tell whether the trend is a temporary decline, which will improve as the Omicron variant peaks across the country, or if there’s more systemic issues at play.

Keep a close eye on the January Nonfarm Payroll report, if its consistent with the ADP print, could...