Introduction
Recent developments suggest that the US economy may be on its way to achieving a ‘soft landing’ despite previous recession fears. This term refers to the scenario where the economy slows enough to curb inflation without triggering a significant downturn or job losses.
Goldman Sachs Research Findings (Source: Goldman Sachs)
- The US GDP is projected to expand by 2.1% in 2024, outpacing the consensus of economist forecasts of 1%. Goldman Sachs Research views the probability of a US recession as quite low, at just 15% over the next 12 months.
- The main factors contributing to this positive outlook include a recovery in labor supply, a reversal of transitory influences on wages and prices, and containment of labor demand despite accelerating final demand for goods and services.
- In terms of policy, Goldman Sachs Research anticipates the Fed will maintain steady rates until late 2024, followed by gradual rate cuts to reach 3.5-3.75% by mid-2026.
November 2023 Jobs Report (Source: ABC News)
- The US added 199,000 jobs in November, and the unemployment rate dropped to 3.7%. This trend aligns with hopes for a soft landing.
- The labor market is showing signs of moderation, aligning with the Federal Reserve’s efforts to slow the economy and inflation. Sectors like health care, hospitality, and government accounted for most job gains, while retail and warehousing saw job cuts.
- Average hourly pay rose by 4% from the previous year, indicating healthy wage growth that surpasses inflation rates.
Economic Outlook
- Consumer spending is expected to remain strong, supported by solid job gains, real wage growth, and an increase in household interest income.
- Business investment might slow down due to tougher financing conditions, but areas like artificial intelligence are likely to see growth.
- The housing market is expected to be weak, with high mortgage rates leading to flat residential investment and modest home price growth.
- The trade deficit is predicted to narrow, contributing to GDP expansion.
Labor Market Projections
- The labor market is forecasted to remain stable in 2024, with the unemployment rate hovering in the mid-to-high 3s. Job growth is expected to slow down to around 100,000 per month by the second half of 2024.
Conclusion
Overall, the US economy seems to be moving towards a soft landing, marked by modest but steady growth, cooling inflation, and a stable labor market. While challenges remain, the current trajectory points towards a balanced economic environment in 2024.
