The trajectory of the unemployment rate will be key to whether Fed tightening resumes.
U.S. employment growth is moderating, but not by enough to stop more Fed rate hikes in 2019.
We can see the meaningful risk of a recession starting as soon as 2020.
The problem with the recovery from the global financial crisis is not just lower growth rates, but still-depressed levels of activity.
We continue to forecast no let-up from the Fed’s quarter-point-per-quarter tightening pace any time soon.
While the United States fights a futile trade war with China, the rest of the world loses.
Maybe the U.S. economy can sustain an unemployment rate as low as 3.5% without a persistent upward bias to inflation, but we are highly skeptical.
U.S. GDP growth may seem weak relative to previous expansions, but it is unsustainably strong relative to potential.
Could a rise in the U.S. labor market participation rate help stop the uptrend in inflation? Not likely.
There is no way to know the precise level, and it can change over time.