Some economists are looking at signs for clues about a potential slowdown in the world’s largest economy.
Is there a slowdown coming for the U.S. economy?
Some economists are looking at signs, like very low unemployment in the US, for clues about a potential slowdown in the world’s largest economy.
Others signal worries about robust headline data hiding a less healthy situation for the country’s inhabitants: a slowdown.
Very low levels of unemployment have in the past foreshadowed slowdowns in the US economy as wages could begin to climb and corporate profits diminish, while market experts such as Goldman Sachs are warning about the country’s solid economic growth resilience.
US unemployment dipped to 4.2% in September, a near 16-year low, the US Department of Labor said in a report in October.
Consequences ahead for the anticipated slowdown
French investment bank Natixis, with close to US$1 billion of assets under management, said in a recent note that “the US economy will in all likelihood slow down substantially: there is a limit to the rise in the participation rate and the employment rate; real wages are slowing down…
Investors should therefore prepare for the consequences,” which could include a rise in interest rates and a depreciation of the dollar, according to a story on CNBC.
Despite forecasts pointing to a growth of between 2 and 3% for 2018 —President Donald Trump has made growth rates of 3% a corners- tone of his economic agenda— Goldman Sachs recently predicted that the US will slow down to around 1.5% toward 2020 while the rest of the world grows around 3.9%.
But a story in the Financial Times said: “If wages and core inflation do start to rise, the Fed may have to raise rates faster than expected. In the medium term, rising wages could start to put pressure on corporate profits and rising interest rates could increase the cost of servicing both corporate and consumer debt.”
The story continues: “Eventually, companies might try to preserve profitability by cutting business investment and staff.”