While the economic situation in Europe is very different, Fed Chief Jerome Powell’s policy is followed closely in Europe. The US economy is also facing rising inflation, but these problems appear to be resolved sooner.
The differences between the two economies are really big, says De Jong. But so are agreements. In general it can be said that the American economy is ahead of the European one. “That’s why it makes sense for us to look into it,” says De Jong. “Let’s follow what’s going on there.” Furthermore, the US economy is the best documented economy in the world. There is simply a lot of data available.
But the most important argument for interest in the American economy, according to De Jong, is its impact. “The Fed’s decisions also have a major impact on our bond and equity markets.”
Macro numbers
Recently released US macro data indicate that inflation is increasingly under control. One could therefore conclude that interest rate hikes by the Fed do indeed help. Exactly, says De Jong. But there are caveats too.
“Retail sales and industrial production data were very positive. And inflation is actually coming down, but this decline is disappointing.’ This combination should prompt the Fed to raise interest rates faster. As a result, capital market interest rates would rise and stock markets would fall. “This happens, but not to a large extent,” says De Jong.
These are the fluctuations of an economy
That macro data could therefore have been skewed in some way, explains De Jong. Severe winter weather in December caused weak manufacturing data, which led to a slightly better result in January. “But these are the fluctuations of an economy.”
Job market
The American labor market, like the European one, is very tight. Economists are surprised that more people are not entering the job market, says De Jong. “A big difference with Europe.” The participation rate, the percentage of people aged 15-75 who want to work, has increased in Europe. In America, it’s actually going down and is even lower than it was before the pandemic.
An explanation is difficult to give. It is a mystery to labor market economists, says De Jong. “But if you look back on the pandemic, you see that the Netherlands has been trying to save jobs with government support. While the Americans have increased benefits and given money to families. Perhaps this is the reason, but it really is not clear.’
Netherlands
At the same time, in your country, you see that unemployment has risen slightly. From 3.5 to 3.6 percent. There’s no need to be too negative about it, thinks De Jong. ‘More people have entered the job market. The number of jobs is on the rise. While the number of people wanting to work is rising slightly faster, unemployment is also rising slightly.’