The US economy appears to be cooling enough for inflation to fall without entering a recession. According to BNR’s in-house economist Han de Jong, this so-called soft landing is the big question right now in the US after stock prices rose sharply in response to a favorable US jobs report. “Friday’s figures offer hope.”
The US has seen reasonable but “not very strong” job growth, says De Jong. “Wage growth has been weakening for several months, that weakening has continued, so that’s where the market reaction has come from.” Wage growth in the US is lagging inflation, and even if inflation is coming down, a soft landing is better for the stock market than a hard landing, De Jong argues.
When wage growth also appeared to be moderating on Friday, stock markets reacted happily. After all, with a moderate wage increase, the Fed doesn’t have to raise interest rates. “And that’s a good thing, because high interest rates are unappealing to stock markets.”
In Europe, De Jong sees a number of positive developments: Energy prices are falling, international transportation costs are falling, and global logistics disruptions are diminishing. “Economic growth has weakened, we may be on the verge of a recession.” Although De Jong does not rule out a “short and mild recession”, he thinks it is still too early to wave the flag.
Disappointing
After all, December’s inflation data was disappointing: Of all the categories for which Statistics Netherlands has released data, only energy has recorded a drop in inflation. Inflation continued to rise in food, services and industrial goods. It is unclear how the economy will develop further, De Jong cites China as one of the most uncertain factors. If the company reopens and business resumes, oil prices could rise, which is bad news for us.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
