Ray Perryman is director of the Perryman Group and distinguished professor at the International Institute for Advanced Studies.
The U.S. economy continues to defy many expectations, creating new jobs at a surprisingly rapid pace in the face of seemingly ever-present challenges. Unless there is a major pullback, we should see a continuation of the expansionary pattern (perhaps with some bumps along the way). Here's a quick look at my latest forecasts for the US economy and factors influencing likely development.
Inflation has not yet been completely contained, but the economy is doing much better than it was a year ago. The Federal Reserve's last increase in target interest rates occurred last summer, and there continue to be clear signs that rate cuts will begin in the next few months. The timing is somewhat dependent on data releases in the near future as the Fed remains focused on its dual mandate of promoting maximum employment and stable prices. Recent job gains and raw material costs may push back the timeline somewhat, but not for a long time.
The number of job openings in the U.S. remains high, although below numbers in the early stages of the recovery from the pandemic; There are still significant bottlenecks in many industries. While major COVID-related disruptions in the labor market have largely abated, long-term demographic trends point to continued challenges for the foreseeable future. Solutions include a range of options such as artificial intelligence (AI), automation and other capital investments, as well as improved workforce training and even the availability of child care. Meaningful immigration reform (while protecting the border) is also needed.
While the current outlook includes both positive and negative factors for the next five years, I expect the US economy to grow at a relatively healthy pace. Growth continues despite challenges ranging from the Federal Reserve's efforts to contain inflation to major geopolitical tensions around the world to navigating the many challenges posed by the pandemic. For now, it appears that the elusive soft landing has already been achieved, although future events could well cause disruption.
The latest forecasts from the Perryman Group suggest that U.S. real gross domestic product will increase by 2.65% annually during 2023-2028. Total employment is expected to grow by approximately 13.9 million net new jobs, an annual increase of 1.72%. Performance will likely be below these thresholds in 2024, with momentum increasing over time.
Uncertainty will remain high due to the situation in the Middle East, Ukraine, Venezuela, the Red Sea and elsewhere. A major escalation could lead to higher energy prices, supply chain disruptions and other potential headwinds. We also have to deal with the four-year fluctuations of election year politics. Still, the economy is on much firmer ground than it was not long ago, and underlying fundamentals suggest moderate growth. Stay safe!
Like this:
Is loading…
Comments are closed.