The latest key economic indicators in the U.S shows both economy and the labor market looking healthy as we enter into 2019. The GDP growth however is expected to oscillate between 2 and 3 percent. U.S Federal Reserve (Fed) is not worried much about inflation or deflation. This seems like the ideal Goldilocks economy one would dream to see. Even though the U.S president and his economic advisors have been promising a growth of 4 percent this year. It is possible the U.S growth (and Global growth) could accelerate and create a bubble in the markets.
U.S Economic outlook 2018 and beyond
Fed recently raised the fed funds rate to 2.5 percent. It is widely expected for Fed to raise the short term borrowing rates two more times in 2019 bringing the rates up to 3 percent before putting a pause on the rate increase cycle. As we know Fed started to reduce its balance sheet from $4 Trillion dollars back in 2017. As they don’t buy the securities, this creates more supply in the Treasury market. This raises the 10 year yield which in effect increases the long term interest rates that is tied to financial instruments such as fixed rate mortgage and corporate bonds.
In other news, the labor market continues to show strength. As the year 2018 came to a close, the unemployment rate stood at a decent 3.7 percent. The last unemployment report showed some solid job gains across the spectrum. Not only that, there is an increasingly tight labor market where there are many unfilled job positions especially in the Tech industry.
“This report continues to paint a picture of an increasingly tight labor market,” said John Ryding, chief economist at RDQ Economics in New York. “It continues to signal that the Fed has fully met its employment objective.”
In conclusion we think there is still room for the U.S economy to grow. We hope the policymakers continue to keep track of the different economic indicators and form sound policies that benefits all American workers.