According to the latest economic data, the US economy is heading for a “soft landing”. The Federal Reserve’s scenario is coming true. Experts view the stabilization of the labor market and steady low inflation rates as signs of such a soft landing.
The ongoing decline in US inflation and the resilience of the domestic labor market have sparked hopes for an imminent rate cut by the Federal Reserve. The first round of monetary easing will hardly entail a sharp rise in unemployment and hurt economic growth.
Currency experts at Goldman Sachs Group Inc. believe that the Federal Reserve has already completed the economic rebalancing discussed two years ago. “If everything develops according to the Fed’s agenda, the country will move towards a normal economic environment soon,” Goldman Sachs reckons.
The US nonfarm payrolls read that the US public and private sectors added 272,000 jobs in May 2024. In April, the revised number was 165,000, almost double the current figure. As for the latest JOLTs data, the number of vacancies decreased in May. Experts explain this by the fact that firms are hiring fewer employees. Moreover, the number of vacancies per unemployed person is gradually declining.
Economists believe that the decrease in the number of job vacancies to the lowest level since February 2021 indicates a return of the labor market to its pre-pandemic condition. Consequently, it sets the stage for the so-called “soft landing.” At the same time, the unemployment rate in the US has remained below 4% for the past two years. The PCE price index (personal consumption expenditure inflation) preferred by the Federal Reserve was 2.7% in April on year. The annual PCE inflation rate has been moderating its growth since 2022.
For several years straight, the US economy has been in a shaky position on the back of a tight labor market and runaway inflation, despite the Federal Reserve's efforts to curb it. Markets are still in limbo about the Fed’s agenda for the funds rate.
According to Wall Street forecasts, the Federal Open Market Committee (FOMC) is expected to put interest rates on hold at the next policy meeting. Most traders and investors also do not anticipate any radical changes on this matter.