Has the US Dodged an Economic Slowdown?

Investors have flocked back to riskier assets this quarter as markets re-priced the risk of an economic slowdown in the world's second-largest economy

Dave Sekera, CFA 9 April, 2019 | 2:32PM
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Wall Street, New York, United States

The idea that United States has dodged an economic slowdown has given investors renewed enthusiasm for riskier assets and forced a sell-off of safe havens. Markets plunged lower last November and December as investors were pricing in a sharp economic slowdown; consumer spending had drastically slowed and Chinese economic metrics indicated economic contraction in the world's second-largest economy. However, the markets bottomed out at the end of December after global central banks quickly dialled back on their programmes to normalise or tighten monetary policy.

Among the economic metrics released last week, nonfarm payrolls for March increased to 196,000 from the stagnant 33,000 reported in February. Investors were pleasantly surprised as the March report was higher than consensus expectations and near the top of the consensus range. At 3.8%, the unemployment rate remained near its 49-year low and wage growth grew 3.2% on a year-over-year basis, reflecting a tight labour market.

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About Author

Dave Sekera, CFA  is a senior securities analyst with Morningstar.