How Is The Current Us Economy – The U.S. economy is expected to grow by three key metrics in 2023: economic output growth, labor market improvement, and inflation reduction. This month, the IMF released a new World Economic Outlook (WEO), which provides an important opportunity to assess the US economy in the context of a global outlook. Growth is driven by global growth, labor markets and inflation, and is a major source of energy for the global economy.
The resilience of the entire global economy is a testament to the international policy cooperation and coordination that is helping us survive the pandemic. In particular, the US policy environment is a clear contributor to US economic activity. The Biden administration is focusing on supportive measures through the Bipartisan Infrastructure Act, the CHIPS and SCIENCE Act, and the Effective Reduction Act, working to expand our manufacturing capacity to create room for faster growth without inflation. In fact, the October 2023 WEO shows improved global growth in part due to the strength of the US economy. Our supply-side investments support not only the US economy but also the global economic outlook.
How Is The Current Us Economy
Advanced economies face different shocks and challenges than the United States. Russia’s import-dependent economy has been hit hard by the conflict in Ukraine, with sharp increases in energy prices and other cuts. As the WEO points out, the euro area has been hit with strict anti-crisis rules due to the energy crisis. WEO also cites analysis that shows that pathways through energy shocks linked to external factors are more likely to be the main inflation drivers in Europe than in the United States. Therefore, comparisons between different economies should be made carefully. In fact, most of the world’s developed economies have similarly high estimates. And there are many risks to the U.S. outlook, including tight credit, continued uncertainty about government funding, and continued attacks on auto insurance. But beyond growth, jobs and inflation, America’s resilience is an important source of global economic strength.
Gross Domestic Product By State And Personal Income By State, 4th Quarter 2022 And Year 2022
Global recovery was slow and uneven across countries. In many advanced economies, real GDP is higher than pre-disease levels. US real GDP surpassed pre-epidemic levels in the first quarter of 2021 and is now 6.1 percent higher than in Q4 2019.
To some extent due to the various events mentioned above, the recovery of real GDP was faster in energy exporting countries (US and Canada) than in energy importing countries (the remaining countries in the number).
Even today, most advanced economies are below the growth trend they were in before the pandemic — except for the United States, which this year is on track to return to levels predicted by past trends. – World None of the major advanced economies in our sample have reached the GDP levels they would have today if pre-pandemic trends continued. But due to a rapid return to normal growth, the United States is the closest, where real output is only 1.4% lower if pre-pandemic trends continue.
Differences in national employment policies can make it more difficult to compare unemployment rates across economies. But still, the unemployment statistics of the COVID era show a big difference between the G7. The United States and Canada saw an increase in the unemployment rate in April and May 2020 and workers were supported by an increase in unemployment insurance, while many European economies saw a decrease in the unemployment rate with work plans.
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However, after the shock of Covid, the US unemployment rate improved rapidly and has remained consistently below 4 percent since January 2022. Amid the fastest economic growth since the 1980s and rising labor force participation rates, the labor market in the United States remains strong. The current unemployment rate is 3.8 percent.
Although many advanced economies have higher unemployment rates than the United States, they are still strengthening. In August, the unemployment rate in the euro area returned to a record low of 6.4%.
US core CPI inflation (excluding food and energy) has declined significantly over the past 12 months. However, national comparisons are not easy because countries have different standards for what is included in their energy efficiency baskets – particularly regarding owner equivalent rent (OER, or owner-occupied housing service rent value). While the US uses OER as a measure of CPI, European inflation estimates do not. The use of a key measure of the composite index of consumer prices—excluding food, energy and OER—allows comparisons between countries.
A significant increase is noticeable among most industrialized countries. Although inflation in the United States grew faster than in other G7 economies – reflecting a faster recovery from the pandemic – it also fell sharply. In fact, when rents set by landlords are removed to compare U.S. core inflation with other countries, U.S. core inflation is currently 2 percent—well below most economies. Another major development
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Some of the differences between European economies are due to the Russian invasion of Ukraine, which has significantly increased food and energy prices and caused some inflation. Even with this challenge, these economies have recently shown some signs of resilience – welcome trends for their near- and medium-term prospects.
Stronger-than-expected U.S. growth continues to fuel upward shocks to global growth in 2023, and the IMF notes that the likelihood of a sharp slowdown has returned and downside risks have softened since last spring. While significant risks to the U.S. economy remain, the progress we have made demonstrates the value of speeding up and responding to progressive policies while investing significantly in the productive capacity of our economy. does
Including OER puts the U.S. core inflation rate at 4.1 percent in September 2023, but results in a broader global comparison when we use target country measures. Data for March indicated a cooling of the US economy but no fundamental change in the outlook for the near-term outlook. The Astor® Economic Index remains at the same level until 2023, at a level similar to average growth.
One of the biggest challenges (perhaps the most) of the current economic cycle is the job market. Monetary policy has been slow to act, and its impact on employment is indirect, but the Fed has pointed to a tight labor market as a catalyst for further progress in the fight against inflation. Low unemployment leads to more competition for workers, raises wages (which puts it at 0.2% m/m in real terms), and thus puts pressure on prices as firms increase their appetite. Nonfarm payrolls averaged 351,000 m/m over the past 12 months, and the March release of 236,000 is the lowest in recent history, but also shows that hiring is encouraging an active and strong appetite for work. The Fed may get some relief from some cooling but wants to see smaller gains in the coming months, as well as a further cooling in wage growth.
Gross Domestic Product By Metro & County
Speaking of cooling, the ISM Purchasing Managers’ Index for manufacturing continued to slide, falling even further (ie below 50) to 46.3. The decline was driven by a decline in new orders and payment rates, the latter indicating that the supply chain for manufactured goods has largely rebounded. The ISM Services PMI, meanwhile, fell to 51.2 from 55.2, still in positive territory but showing a cooling in new orders. It is worth noting that other PMIs, such as the series published by S&P/IHS Markit, are not affected by differences in the surveyed world.
According to a breakdown of PMI forecasts, inflation this year has been largely driven by the services sector rather than the demand for goods seen throughout the pandemic. Headline CPI for March came in at 5.0% y/y (0.1% m/m), core came in at 5.6% y/y (0.38% m/m), higher than estimates and the previous two months. The comparison is low. . . Core prices were driven by housing (up 0.25% m/m, which is generally expected to cool in the coming months) and transport, and inflation eased with lower energy costs. There’s something to love about this supplemental version for pigeons and birds. On the one hand, inflation-adjusted prices (which include major retailers) are the lowest in two years, as is the average CPI. On the other hand, nominal super housing (which includes food, energy, used cars and shelter) is still around 4%. In other words, most of the inflation is related to shelter costs, but pressures are still widespread.
Overall, the labor market and rates could lead the Fed to hike by 25bps at the May FOMC meeting. Other than that, it looks like the Fed may be sitting on the sidelines for a while to allow stronger policy forces to run their course. Market participants are very confident that the Fed will go into a tighter position in the second half of the year. They could be in for a surprise if inflation proves too persistent again, or the labor market recovers.
Astor Investment Management LLC is an investment adviser registered with the SEC. All information contained herein is for informational purposes only.
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