According to the recent monthly jobs report, the US labor market shows continued signs of strength, contrary to the expectations of cooling down rapidly in 2024. Moreover, the consumer’s resilience has made economists more optimistic about the US economy’s growth.
Wall Street Forecasts on the US Economy
Michael Feroli, JPMorgan’s chief US economist, said in a note that the economy’s early-year momentum has been stronger than anticipated.
While they still expect growth to slow down, they now predict the US economy could do better in the middle of the year compared to previous Wall Street forecasts. This expectation comes close to the trend that was being seen in consensus forecasts.
Binky Chadha, Deutsche Bank’s chief global strategist, said that according to Yahoo Finance’s Chartbook consensus forecasts, the growth of the US economy has been underestimated throughout the last year. This has continued, with quarter-over-quarter growth projections for the first six months of this year increasing since January.
Wall Street Forecasts now say that the US economy is growing at an annualized rate of 1.8% in the first quarter, up from the 0.6% projected in January, according to Bloomberg data. Second-quarter growth forecasts have also been revised up to 1.3% from 0.4% over that period.
Feroli has increased JPMorgan’s forecast for Q2 GDP from 0.5% to 1.5% after the jobs report was released on Friday.
Deutsche Bank’s senior US economist Brett Ryan, whose team did away with the possibility of a recession in 2024 last month, has now said that the changing scenario of the US economy is mainly due to the labor market that is stronger than anticipated, making consumers spend more than anticipated.
Ryan recently said to Yahoo Finance, “The labor market is not usually a leading indicator, but it is a sustaining indicator. And what you earn is what gets spent.”
In February, average hourly earnings increased by 4.3% compared to the previous year, according to the Bureau of Labor Statistics. While this was a slight decrease from January’s 4.5% growth, it is still higher than the rise in prices shown in different inflation measures.
Ryan said that this supports consumer spending and helps prevent a decline. Moreover, the headline inflation went up by 3.2% in February.
Even though there were a lot of headlines about layoffs this year, wage growth is happening along with data showing that there are not many widespread job cuts happening in the job market right now. This occurrence is going against what was being predicted by Ryan’s team at Deutsche Bank who were concerned at the beginning of the year. This change in the Wall Street forecasts adds to a more positive outlook for the US economy.
Ryan said that firms right now are keeping their employees, suggesting a tight job market, resulting in companies being hesitant to let go of their current workers. He added that this is probably what is helping the job market right now.
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