2024-01-06 06:15:00
The scenario of a soft landing for the American economy seems more clear than ever. While inflation fell to 2.6% over one year in November – its lowest in three years according to the PCE index favored by the American Central Bank (Fed) – employment is experiencing a downward trend. rise.
Indeed, the job market was much more solid than expected last month: 216,000 were created, up compared to the 173,000 in November, for which the data was however revised downwards. according to figures published this Friday by the Department of Labor. Above all, the December figure is well above the 162,000 job creations which were forecast by analysts, according to the briefing.com consensus.
These figures from the Department of Labor therefore confirm the trend observed the day before concerning job creations in the private sector, estimated at 164,000 in December, according to the monthly ADP/Stanford Lab survey. The increase in job creation recorded since October can be explained by “a catch-up effect in certain sectors of activity including the return to post-covid normal which took longer”, explains Christopher Dembik, investment strategy advisor at Pictet AM, to La Tribune. We thus find the hotel industry, catering and personal services.
A widened public deficit
The public sector has also largely contributed to the general improvement: “It is one of the major drivers of job creation”, indicates the economist who attributes this phenomenon to Joe Biden’s decision to widen the public deficit. The latter climbed 23% during the 2023 fiscal year, ending September 30, compared to that of 2022, reaching $1.695 billion. It might thus exceed 8% of GDP. “A level never seen outside of periods of financial crisis and periods of war”pointe Christopher Dembik. “However, an abnormally high public deficit is a driving force behind the economy and fuels job creation in the public sector”he concludes.
These announcements “confirm that 2023 was a great year for American workers”nevertheless welcomed the American President, Joe Biden, affirming, in a press release, that “the economy created more jobs this year than any year under a previous administration”. A good point for those who are running once morest Donald Trump for the presidential election in 2024. The head of state will thus be able to boast of having reached a historically low unemployment rate: it remained in December at 3 .7%, its lowest level since July.
Wage increase
As for wages, they increased by 0.4% compared to November and by 4.1% over one year, once more according to data from the Labor Department. A more moderate progression than before and which does not “no risk of fueling the price-wage spiral”according to ADP’s chief economist, Nela Richardson, and which is also a sign that the labor shortage that has affected the American labor market for more than two years seems well and truly over. “The job market is returning to levels very close to what it was before the pandemic”he believes.
Read also Labor shortage in the United States makes Biden’s dream come true: doubling the minimum wage
However, over the whole of 2023, the average number of job creations per month (225,000) remains lower than the unprecedented average observed in 2022 (399,000). Over the year as a whole, 2.7 million additional jobs were created, compared to 4.8 million the previous year.
Success of fiscal and monetary policies
An environment which remains largely positive, but which might weaken next year. “The consensus estimates that around the middle of the year, job creations will stabilize around 100,000”reports Christopher Dembik who nevertheless believes that this scenario of a slowdown in the American economy is too pessimistic.
Especially since the latter shows much more resilience than expected. “It must be admitted that, despite the unprecedented context, budgetary policy [du gouvernement, ndlr] and monetary [de la Fed] have perfectly succeeded in getting the United States out of the period of high inflation that it was experiencing by avoiding a recession and in a period of time that no one would have imagined.explains the analyst who insists: “No one would have thought that inflation would have fallen so quickly.” And “real success” compared to the euro zone, linked on the one hand to the widening public deficit. Moreover, “there is a bonus for the first person to leave”, believes Christopher Dembik. The Fed was, in fact, one of the first central banks to raise its rates when the ECB was still wondering regarding the temporary nature of inflation.
Read also Rate cut: unlike the Fed, the ECB does not want to hear regarding it for the moment
And while the monetary tightening carried out by central banks weighs heavily on the growth of the countries concerned – as evidenced by the growth figures of the twenty countries of the euro zone including those of Germany which experienced a recession in 2023 – consumption is nevertheless maintained in the United States. And this is thanks in particular to the mobilization of the surplus savings accumulated by Americans during Covid. The latter have, in fact, drawn on it to continue consuming. Unlike that of Europeans, it will soon be exhausted, points out Christopher Dembik, who also underlines the role of consumer credit, widely used by consumers across the Atlantic although at currently high rates, in maintaining the consumption.
Another factor supporting the American economy, the flow of capital from Europe and emerging countries, adds the economist who highlights the effects “activity relocation policies launched by Donald Trump and extended under Joe Biden which create jobs”.
As a result, American growth stood at 5.2% in the third quarter at an annualized rate, according to the Commerce Department, i.e. a stronger increase in GDP than that shown in the first estimate, at 4.9% and above all doubling compared to the previous quarter.
Fed Prudence
Nevertheless, if the good health of the economy and more particularly of American employment are good news for the country, this might appear as an element encouraging caution for the American Central Bank. Low unemployment and rising wages are, in fact, a driver of consumption, thus representing a risk for inflation. “For Fed officials, this data supports the idea that it is necessary to maintain a restrictive policy for a while longer”points out Rubeela Farooqi, chief economist of HFE, who nevertheless concludes: “But we anticipate the fact that the next movement will be downward, probably in the middle of the year”. This is in fact what the Fed suggested during its last meeting.
1704527455
#high #rates #curb #inflation #impact #growth #employment