Since the pandemic began in 2020, the United States has implemented large-scale cash subsidies, various tax breaks and paycheck protection programs. Among them, the March 2020 CARES Act is $1,200 per person; $600 per person under the December 2020 CRTR Act and $1,400 per person under the March 2021 ARP Act; At the same time, the Fed restarted quantitative easing and quickly lowered interest rates to zero in two quick emergency operations, which remained there until March 2022.
According to the basic common sense of economics, there will be serious inflation in the United States in the later period. But there is now a phenomenon in the United States that is beyond the bewilderability and bewilderment of economists around the world: high growth and low inflation. According to the first estimate data recently released by the U.S. Department of Commerce, for the whole of 2023, the U.S. economy will grow by 25%, up from 19% growth. According to Factset's consensus estimates, economists expect annual headline inflation to rise slightly in 2023, from 31% to 32%。Among them, the annual inflation rate at the consumer level was higher than 65% is a significant drop.
And the Federal Reserve has also continued to raise interest rates. In 2023, the Fed will hold eight regular interest rate meetings, as is customary. Among them, four meetings chose to raise interest rates; The choice of the four meetings remained unchanged. According to statistics, the Fed has started the current round of interest rate hike cycle since March 2022, and as of July 2023, it has raised interest rates 11 times, with a cumulative rate hike of 525 basis points. Although the multiple interest rate hikes have caused pain in economic growth, the Fed believes that it is necessary and worthwhile, and will largely help curb inflation below 2%. How to explain this phenomenon of "high growth, low inflation"?
Mr. Chen Gong, the founder of Anbang Think Tank, believes that the most important reason is that the US labor market is hot, which has increased residents' income and consumption, increased the economic growth rate, supported the US dollar exchange rate, made imported goods cheaper, and suppressed inflation. The specific analysis is as follows:
In the context of de-globalization, the United States has taken advantage of the influence of geopolitics to introduce a large number of industrial science and technology policies, and a large number of industries and industries have begun to return to the United States. Among them, since the epidemic, the "American Rescue Act", "Infrastructure Investment and Jobs Act", "CHIPS Act" and "Inflation Reduction Act" promulgated by the United States have supported other industries such as chips and new energy vehicles for a total of about 550 billion US dollars, and the total future expenditure will reach up to 1$3 trillion.
With the support of these science and technology industry policies, the growth of manufacturing construction expenditure and real investment in the United States has risen significantly. According to the U.S. Department of Commerce's Census Bureau, in September 2023, U.S. construction spending was $1,996.5 billion seasonally adjusted, up 8.8 percent year-on-year7%。In terms of industries, the sharp increase in manufacturing expenditure was the main contribution, and the manufacturing expenditure was 198.9 billion US dollars, an increase of 61.19%, contributing 48% of the growth in construction spending over the same period, and the monthly year-on-year growth rate has been consistently higher than 60% since the beginning of 2023.
In this context, the U.S. labor market is very hot, but it has declined due to multiple interest rate hikes, and has generally remained high throughout the year. According to the U.S. Department of Labor, 2.7 million new jobs will be added in 2023, with an average monthly increase of 2250,000, an increase higher than before the pandemic. Among them, healthcare, leisure and hospitality are the main areas of job growth. In 2023, ** will increase by an average of 560,000 jobs, an average monthly increase of 2More than double the 30,000 jobs. However, judging from the average number of new jobs for three consecutive months, it has dropped to 16 by the end of 202350,000, the lowest since January 2021 and far less than the 33 at the beginning of 202340,000 people.
In addition, the U.S. labor force participation rate was 625%, almost from the beginning of the year 624% was flat, and remained at a high level for the whole year, still 0A gap of 8 percentage points. The U.S. unemployment rate has increased from 3 at the beginning of 20234% to 37%, an increase of 03 percentage points. However, looking at the historical range, the unemployment rate is still in the historically low range. Monthly wages also rose slightly in December: the average hourly earnings of nonfarm employees in the United States rose by 04%, up to 34$27. Over the past 12 months, average hourly earnings have increased by 41%。
Household incomes have increased sharply due to the rise in the employment rate and wage growth, which has supported the rapid growth of consumption throughout the year, but it has also declined. According to relevant data, most of the consumer indicators in the United States in the fourth quarter of 2023 fell from the previous quarter, of which the annualized rate of consumption recorded 28%, although down from the previous quarter, still exceeded market expectations. Against the backdrop of a low base in the same period last year, the year-on-year growth rate of consumption recorded 26%, up 04 percentage points. Among them, the month-on-month annualized rate of commodities fell to 38%, benefiting from the increase in consumer demand during the year-end Black Friday and Christmas festivals, it still maintained positive growth. The annualized rate of services rose to 24%, up 0. from the previous quarter2%, becoming the main force driving consumption.
The growth of household consumption supported a high rate of economic growth, which in turn supported the dollar exchange rate, making goods cheaper and suppressing inflation. In anticipation of interest rate cuts, U.S. household consumption is likely to increase further, which will continue to support U.S. economic growth. According to the University of Michigan, the U.S. consumer confidence index soared to 78 in January 20248, the highest level since July 2021 and surging 29% since November 2023, the largest two-month increase since 1991, shows that consumer sentiment is improving.
Final conclusion: At present, there is a phenomenon in the United States that makes economists all over the world unbelievable and puzzled, that is, high growth and low inflation. Although the Fed's repeated interest rate hikes have caused pain in economic growth, they have greatly curbed inflation. More importantly, with the help of the geopolitical situation, the United States has attracted a large number of industries and industries to return by formulating policies for the science and technology industry, which has promoted the hot labor market, increased residents' income and consumption, increased the economic growth rate, supported the dollar exchange rate, made imported goods cheaper, and suppressed inflation. (*Anbang Consulting).