An analysis showed that the U.S. economy is not falling into a recession, contrary to some expectations, due to the increase in real income and the government’s manufacturing support policy.<\/p>\n
The US daily Wall Street Journal (WSJ) reported on the 2nd that the US economy is showing surprising resilience, including steady employment and solid consumption, despite the US Federal Reserve’s (Fed) aggressive interest rate hike. In fact, in relation to the US August employment situation report on the 1st, US President Joe Biden said, \u201cInflation has been alleviated over a long period of time, jobs are increasing, and wages are rising,\u201d and \u201cAll jobs lost during the pandemic have been recovered.\u201d<\/p>\n
According to the employment report released by the U.S. Department of Labor on this day, the number of non-farm jobs in the U.S. last month increased by 187,000 compared to the previous month, and the unemployment rate recorded 3.8%.<\/p>\n
The number of jobs in August exceeded the expert forecast of 170,000 jobs compiled by the Wall Street Journal (WSJ), and the unemployment rate rose 0.3 percentage points compared to the previous month.<\/p>\n
The US base interest rate has currently been raised to 5.25-5.50% per year, the highest level in 22 years.<\/p>\n
WSJ explained three reasons as to why the U.S. economy did not fall into recession despite such high interest rates.<\/p>\n
First, it was revealed that real income increased, and more employment and spending occurred due to an increase in the workforce and a slowdown in price increases.<\/p>\n
Real after-tax income in July increased by 3.8% compared to the same period last year, and this figure has been calculated to have increased compared to the previous year every month since last January.<\/p>\n
This was analysed to help stimulate consumer spending, which accounts for about two-thirds of U.S. economic production. \u201cThe Fed has certainly slowed down credit-sensitive activity,\u201d said Neil Dutta, an economist at research firm Renaissance Macro.<\/p>\n
In relation to this, WSJ presented a second rationale, saying that enormous demand was suppressed due to the pandemic and that such demand was less sensitive to interest rate increases. In particular, in the case of automobile production, it was unable to keep up with demand in 2020 and 2021 but is now catching up and industrial activities have become more active.<\/p>\n
Lastly, WSJ noted that the U.S. government, which stimulated the economy with cash and low interest rates during the pandemic, has now increased spending on a massive scale through manufacturing support policies such as the Inflation Reduction Act (IRA) and the Semiconductor Act. Although liquidity has partially contracted due to the recent interest rate hike, the government’s large-scale stimulus package is further encouraging private sector investment.<\/p>\n
This situation has also raised expectations for a soft economic landing. A soft landing refers to overcoming inflation while avoiding an economic downturn, such as a collapse of the job market.<\/p>\n
Expectations for a soft landing were reflected in the stock market, and the Standard & Poor’s (S&P) 500 index rose more than 17% this year. \u201cWe are going to have a soft landing,\u201d said John Fish, CEO of construction company Suffolk. \u201cThe combination of a global economic recovery, additional federal spending and an eventual decline in interest rates will create tremendous demand in the service sector of the economy.\u201d He spoke.<\/p>\n
Previously, in July, he lowered the likelihood of a U.S. economic recession in the next 12 months from 35% to 20%. However, some point out that to predict whether the U.S. economic strength will continue, the situation in other major economies, such as China and Germany, must be taken into consideration.<\/p>\n
This is because China, the world’s second-largest economy, has recently entered deflation (a decline in prices amid an economic recession) and the crisis in the real estate sector is increasing, and Germany has also seen warning lights in its economy, including a slowdown in export competitiveness.<\/p>\n","protected":false},"excerpt":{"rendered":"