Rising US interest rates have confounded negative forecasts, a slight economic slowdown and rising consumer spending. International economists have warned of lingering fears about investment precisely because of high interest rates. Thanks to economic strength, the U.S. will most likely avoid a recession. GDP growth in the U.S. is still expected to increase by 0.6 percentage points this year and by 0.4 percentage points in 2024. Headline inflation is expected to be 4.0% by the end of this year and 2.5% the following year. Among other things, the Fed announced that it will cut interest rates by 100 basis points, to 4.375%, by the end of 2024. The yield on the 10-year Treasury note will be 3.9% at the end of 2023 and 3.5% at the end of next year 2024.
Measuring US core inflation
The August 2023 jobs report showed another solid increase in wages. The survey from previous months revealed the fact that the labor market is easing. While the U.S. economy created 187,000 jobs, the three-month average fell to 150,000 jobs (the slowest pace since January 2021). While the unemployment rate rose to 3.8% in August, the labor supply rose 736,000 jobs. The high labor supply is putting downward pressure on wage growth, which fell 4.2% year-over-year in August due to higher costs to companies from high interest rates and high inflation. The latest job openings data point to a recent cooling in the labor market, with jobs falling by 338,000 to 8.8 million (the fewest since March 2021). Unemployment claims remain historically low at around 230,000.
Wage growth in the USA
