Are you as confused as I am? How can the stock market be crashing and the “U.S. Economy be alive and kicking,” according to Scotiabank Economics? Is President Trump right that our biggest fear for the U.S. Economy should be interest rate hikes by the Federal Reserve? What does the tariff war really mean to the individual consumer? Should you be worried about the word recession cropping up?
Sean Murphy, Smith Hanley Associates’ Credit Practice Recruiter, calms your fears about conducting a job search in 2019 and tries to summarize the impact on the individual of all these U.S. Economy forecasts, predictions and warnings.
Unemployment Rate
This is the #1 statistic that will impact your job search in 2019. The 3.7% unemployment rate remains at a 49 year low and below what is considered full employment at 4%. Companies need you.
Gross Domestic Product
Consumer spending accounts for more than two-thirds of the U.S. economy. GDP for the fourth quarter of 2018 was around 2.4%. This follows an annualized increase in the third quarter of 3.6%. Consumer confidence is high and spending is being boosted by a tight labor market spurring faster wage growth.
The U.S. consumer spending and GDP growth is in stark contrast to a dramatic fall off in retail sales in China and the slowest rate of business expansion in four years in Europe.
Stock Market
While the GDP was growing 2.4% in the fourth quarter the stock market’s S&P 500 was down by 10% in the same time period. “It is obvious that the economy is not falling apart as quickly as the markets are implying,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research. “Importantly, consumer confidence is strong, which indicates that strong employment and lower gas prices are offsetting the drop in equity markets.”
What is causing the problem in the stock market? Uncertainty about where the tariff wars are going and what their impact will be on company profitability is one factor that 47.3% of economists surveyed by the Wall Street Journal cited as the top threat to the economy. Some consider the end of year market correction as needed to bring the over-heated market more in line with real stock value.
Tariffs and the Trade War
In the Wall Street Journal survey mentioned above, where economists felt the trade war was the top threat to the economy in 2019, Economists at JPMorgan, Bank of America Merrill Lynch and Goldman Sachs all agreed that U.S. GDP will slow in the second half of 2019 and a continuing trade war could make the economic slowdown worse. The good news: None of the Wall Street banks predicted a recession.
The other fear of what an increase in tariffs or new tariffs could do, is drive up prices of imported goods to the point where consumers and businesses will slow their spending and investment and harm GDP growth.
Federal Reserve
President Trump cites the planned increase in interest rates by the Fed as causing the problems in the stock market. Only 4 of 60 economists in the Wall Street Journal survey cited the Fed as a top fear. Fed rate hikes came in fifth on the list of risks. The general sense is that the increases have been good for the overall health of the U.S. economy.
