US employment figures will be released this Friday. This week’s most important macro data. Even as the labor market cools, 200,000 new jobs are expected. Unemployment is expected to drop to 3.6 percent. Average hourly wages are expected to rise slightly by 0.3 percent from last month. The labor market is surprisingly strong, given the series of rate hikes over the past 15 months.
The housing market is rebounding
Not only is the United States’ labor market surprising a panel of economists. The housing market, another pillar of the US economy, is also showing some signs of decline. The housing market appears to have bottomed out and is recovering somewhat. The number of homes sold rose more than 12 percent last month and home prices have been rising for three months. Buyer interest is on the rise again. Despite doubling mortgage interest rates. The Home Builders Index (XHB) has also gained 33 percent in the stock market this year.
America is an oasis of peace
The US economy also grew faster in the first quarter than initially thought. GDP growth was revised up to 2.0 percent from 1.3 percent. As stated therein GDPNow The economy grew 1.9 percent in the second quarter, the Atlanta Fed said. Although there have been months of speculation about an impending recession, this has not materialized. Indeed, where growth in the European Union and China has been disappointing, the US remains an oasis of economic calm.
Inflation is falling sharply
The Federal Reserve has raised interest rates no less than ten times in the past 15 months. After all, inflation had to be fought. Central bankers seem to be winning big on this one. CPI fell from 9.1 to 4.0 percent in a year. Next month, it is expected to drop to 3.2 percent CBI Nowcast From Cleveland Peter. If the CPI increases by 0.2 percent this month, the CPI could end up at 2.84 percent on an annualized basis.
More damage than desired
Yes, core inflation remains stubbornly high and few more rate hikes are expected this year. But is it necessary? Central banks tend to extend their tightening policies. We have seen more than once that it not only drove inflation, but also caused more damage to the economy than desired. After all, central bankers base their policy on past statistics. They cannot do otherwise.
Why is the economy so resilient?
Why have the economy and stock market proven so resilient despite tight monetary policy? Since March of last year, the Federal Reserve has raised interest rates no less than ten times. Don’t fight feeder This method did not work. The It has since risen by 6 percent Even 15 percent.
Against fiscal policy
However, the pandemic, high energy prices and stability have opened the floodgates wide open for governments as central bankers have pursued strong tightening policy. US budget deficit rises sharply. Earlier this year the national debt peaked again. After several fives and sixes had to increase again. We’re a month in, and the U.S. has already borrowed $865 billion in four weeks.
Stock markets heading to all-time highs?
As long as governments continue to stimulate the economy, central banks’ tightening policies will be completely undone. Money continues to flow into the economy and stock markets hold. Now that inflation is coming down, stock markets are rallying again. For example, the AEX index is only six percent below that All time high From 2021 onwards.
No more clouds in the sky?
Not a single cloud left in the sky? In the short term, the sky looks very clear. But governments cannot borrow indefinitely to stimulate the economy. After all, money is no longer cheap. Government debt has increased and the interest burden has not decreased. Rising interest costs lead to further increase in government debt. So governments will have to borrow more and the interest burden will rise further….a doomloop is imminent. This threatens to create a situation where central banks cannot raise interest rates even if they want to. Central bankers are caught up in the fight against inflation. However, if inflation continues to fall at this rate, recovery is imminent. Interest rate hikes are no longer needed.
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