Is US heading toward a recession? Know what Barclays thinks
Pooja Sriram, a leading US economist at Barclays, has expressed confidence in the resilience of the American economy. Despite recent fluctuations in the labor market, she anticipates a "soft landing" rather than a recession. This term refers to the Federal Reserve's objective of managing inflation without causing significant job losses or negative economic growth. Sriram acknowledged that job growth has slowed down but remains optimistic about the overall economic outlook.
Job growth slowdown and unemployment rate
Sriram highlighted that the three-month moving average of employment growth is currently at 116,000 per month. This figure represents approximately half the pace it was growing at three months prior. However, she also pointed out that the unemployment rate—a key indicator monitored by both the market and the Federal Reserve—has decreased to 4.2% after a rise in July.
Wage growth remains strong despite labor market cooling
Despite a slowdown in the labor market, Sriram noted that wage growth has remained robust. She stated, "We've seen signs of cooling in the labor market, but it's been gradual and disciplined." Additionally, US consumer spending—a critical driver of the economy—has remained strong due to solid household income and wealth fundamentals. Other economic indicators like the Purchasing Managers's Index (PMI) do not indicate rapid deterioration, further supporting her soft landing prediction.
US Fed expected to begin rate-cutting cycle
Sriram expects the US Federal Reserve to initiate a rate-cutting cycle in September, which should benefit most markets. The latest US jobs report released on September 6 has heightened expectations of a 50 basis point (bps) rate cut by the Federal Reserve at its forthcoming meeting on September 17-18. She also addressed concerns about cooling labor market conditions and potential market reactions to these changes.
