Londres (CNN Business) — Fears about the possibility of the United States falling into a recession they dominate conversations among investors and pose a risk to the Biden administration heading into the midterm elections this fall.
Meanwhile, the US economy continues to function, although there are signs that it is slowing down.
This poses new challenges for companies and workers. But it might help Federal Reserve in the medium term, in its attempt to reduce support for the economy from the time of the pandemic and to control inflation without generating a shock.
Here are three indicators that America’s economic engine is cooling compared to the frenetic period that followed the lifting of coronavirus lockdowns.
1. The labor market: The US employment report for May showed on Friday that 390,000 jobs were added last month. It is a strong figure and higher than expected, but lower than the 428,000 in April.
For much of the past year, between 450,000 and 650,000 jobs have been added each month.
2. The housing market: Borrowing costs have skyrocketed as a result of the Federal Reserve’s decision to start raising interest rates. A 30-year fixed-rate mortgage averaged 5.09% in the week ending June 2, down from 2.99% in the same period last year.
This is driving some potential homebuyers off the market, helping ease strong demand. The home sales stocks in the United States fell for the third consecutive month in April.
3. The “Beige Book”: the latest Federal Reserve study on economic conditions published this week, known as the “Beige Book”, showed that all 12 districts in the country experienced growth, but the impact of tighter financial conditions was beginning to become apparent.
“Retail sector contacts saw some moderation as consumers faced higher prices, and residential real estate contacts saw weakness as buyers faced high prices and rising interest rates,” the report said. report.
Eight districts reported that “future growth expectations among their contacts had diminished,” while contacts in three districts “specifically expressed concern about a recession.”
However, the data is confusing. Citigroup economists believe a pullback in hiring may not be a tangible sign that the economy is returning to a more normal pace, for example.
“While this slowdown could be a positive signal to the Fed that labor demand is easing, in the short term we would expect a softer pace of job growth to reflect more the constraints caused by labor shortages,” they said. in a research note published this week. In April there were 11.4 million job openings in the United States.
Also, while home sales have declined, prices continue to rise. The median home price in April was a record $391,200, up 14.8% from a year ago, according to a report from the National Association of Realtors.
This means that it is ultimately too early to say whether the Fed’s plan to engineer a “soft landing” for the economy is working, and that investors would do well to continue to proceed cautiously.