Fears that the United States may slide into recession are dominant conversations among investors, and the Biden administration is at risk ahead of the midterm elections this fall.
Meanwhile, the U.S. economy is bubbling – despite signs that it is slowly falling into gear.
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This poses new challenges for companies and workers. But it may help the Federal Reserve as it seeks to shift epidemic support to the economy and keep inflation in check without creating a shock.
Here are three indicators that the U.S. economic machine is cooling down compared to the frenetic period following the removal of the corona virus locks.
1. Job Market: The U.S. jobs report for May on Friday showed that 390,000 jobs were added last month. This is a firm number and higher than expected, but fell to 428,000 in April.
For most of last year, about 450,000 to 650,000 jobs were added each month.
2. Real Estate Market: Borrowing costs have risen as a result of the central bank’s decision to start raising interest rates. The 30-year fixed-rate mortgage averaged 5.09% for the week ended June 2, up from 2.99% in the same period last year.
This pushes some potential home buyers out of the market, facilitating the rise of demand. Existing home sales in the United States fell for the third consecutive month in April.
3. Beige Book: The Central Bank’s latest survey on economic conditions, released this week, known as the “Beige Book”, found that all 12 districts across the country were experiencing growth, but the impact of the tightening financial conditions was beginning to show.
“Some of the retail contacts softened as consumers faced higher prices, and residential real estate contacts saw weakness as buyers faced higher prices and interest rates,” the report said.
Eight districts reported lower “expectations of future growth between their contacts” while contacts in three districts “expressed particular concerns about the recession”.
Still, the data is confusing. Economists at Citigroup say the contraction in hiring may not be a sure sign that the economy is actually returning to a normal pace.
“While this recession may be a welcome sign for the central bank that labor demand is declining, we expect the smooth pace of job growth in the short term to reflect the barriers posed by labor shortages,” they said in a statement. . Review note released this week. There were 11.4 million jobs in the United States in April.
Also, as home sales have plummeted, prices have continued to rise. According to the National Association of Real Estates, the average home price in April was $ 391,200, up 14.8% from the previous year.
This means that, ultimately, it would be wise for investors to proceed with caution as soon as possible to determine whether the Federal Reserve’s plan for a “smooth landing” for the economy is working.
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