The U.S. Economy: Far Too Early to Break Out the Champagne

Download the article

That markets are wildly optimistic about the U.S. economy is nothing new. What should draw our attention this time around is that such upbeat sentiment has rarely been harder to square with the numbers. For example, contrary to the dominant narrative:

  • The U.S. economy is doing worse than a few months ago, not better. Growth in industrial output is petering out, productivity has moved into negative territory, and employment data point to backsliding.
  • The economy’s ability to cope with higher interest rates simply can’t be taken for granted. Not only has consumer spending yet to pick up, but the real estate market has been derailed by the rise in interest rates since the start of the year.
  • While a change of course by the Federal Reserve may seem long overdue after five years of unconventional monetary policy, it makes no economic sense. This suggests that the Fed is very much in danger of jumping the gun.