As summer winds down, at least two nationally recognized economic experts have a positive outlook on the US’s economic future.
George Ratiu, manager of economic research with realtor.com, sees a “bumper crop of indicators highlighting a resilient economy,” while Jan Hatzius, the chief economist of Goldman Sachs, also sees the US economy “approaching a soft landing.”
Hatzius sounded a positive note to his clients this weekend, writing, “Since the FOMC [The Federal Open Market Committee, the chief decision-making board within the Federal Reserve that sets monetary policy aimed at reaching the Fed’s goals] started hiking the funds rate early this year, we have argued that the U.S. economy can achieve a soft landing, even though the path is narrow.
“It requires sustained below-trend output growth,” he continued, “a rebalancing of the labor market via sharply lower job openings coupled with a moderate rise in unemployment, and a large decline in inflation.”
Hatzius also cautioned that things can still go wrong, but said “Our probability that a (mild) recession will start in the next year remains about one in three, (as )we see some encouraging signs that the economy is moving toward all three of these goals.”
Ratiu pointed out that the number of job openings saw its first increase in four months, as companies continue to seek qualified workers, though, while there are still two open jobs for every unemployed person looking for work, companies are less motivated to fill them due to concerns over a slowing economy.
Ratiu also pointed to the fact that over 4 million employees left their jobs in July as a sign that the labor market remains quite strong, especially as more people who quit usually find a better job.
“These numbers were further supported by the August employment report,” he said, adding that, “The number of new jobs rose again, and the unemployment rate ticked up as more people returned to the labor force.”
Ratiu also noted, “It is perhaps not surprising that consumer confidence increased in August for the first time in four months as falling gasoline prices, solid employment and growing wages boosted household finances.
The average credit score is also at an all time high, said Ratiu, calling it “a remarkable gain” from the ashes of the 2008-2008 housing crash.
Ratiu also voiced some cautions about the federal reserves’s monetary tightening, and is worried about the strong labor market and rising wages.
“The fed is clear,” he said, “that it will not relent in its push to increase the funds rate. The central bank wants to see hiring slow and even promising more pain in store for consumers and businesses with rising capital costs. Ratiu also asserted that consumers and businesses are likely to spend less, as higher borrowing costs are “abundantly clear in slowing real estate markets.”
Average home buyers could also see a very different housing market in the coming year, he said.
“Mortgage rates jumped this week with a typical mortgage payment, a whopping 65% higher than a year ago,”said Ratiu.
According to realtor.com’s August data, consumers are seeing the impact of higher mortgage costs, with inventory growing at a quick pace and homes staying longer on the market, as listing prices decelerated for the third month in a row.
Realtor.com’s weekly update also revealed that with a higher inventory, which can bring prices down, some sellers are worried that they “missed the peak” and are now pulling back.
Lower prices due to higher inventory may even the playing field, even with higher mortgage rates.
