Yahoo Finance What Could Hinder US Economic and Labor Market Growth?
This Truth about the US Economy May Surprise You
Finally, intertwined trade and global growth challenges are another headwind to the heretofore buoyant U.S. economic and hiring experience. For now, the Federal Reserve (Fed) is doing exactly what it should be doing in today’s economic environment, after having missed the optimal window to raise rates two years ago. The central bank has made it clear it’s willing to let labor market hiring and wage growth run a bit hot, given that it has a multitude of tools to deal with that scenario but fewer options for reversing any global growth or inflation contagion.
Market Realist – Global growth challenges
The ups and downs of a complex global (IEFA)(ACWI) economy are affecting US growth. Europe and China (MCHI), the two major markets outside the United States, are slowing down. The Eurozone grew just 0.3% in Q4 2015 compared to 0.4% in Q4 2014. Germany (EWG) and the United Kingdom (EWUS) are experiencing domestic economic and political concerns, limiting their ability to propel economic growth in the European Union. On the other hand, China’s GDP growth rate fell to 6.9% in 2015—the lowest since 1990. Since China is expected to grow at a lower rate of around 6.5% this year, it’s likely to scale down commodities imports substantially.
Apart from China, most other emerging markets are seeing a slowdown in trade. Brazil has slid into recession and political turmoil while other oil-dependent areas, like the Middle East and Russia, face huge fiscal deficits due sustained low oil prices. These global factors have implications for US economic and labor market growth.
In view of these global concerns and their effect on US economic and labor market growth, the Fed is likely to move cautiously. The Fed has already raised a concern about the downside effect of the world’s slowing economy and lower oil prices on the US outlook. Another concern for the Fed is the weak link between the improving labor market and slower wage growth. Fed Chair Janet Yellen said, “There is certainly scope for further increases in wages. The fact that we have not seen any broad-based pickup is one of the factors that suggests to me that there is continued slack.”
Browse this series on Market Realist:
