The US economy continues to grow at an annualized pace of 1 to 2 percent. Although gross domestic product (GDP) expanded by 2.9 percent in the third quarter, much of this acceleration stemmed primarily from a build in inventories and a one-off surge in soybean exports.
Many commentators hailed the October employment data as a sign of strength, but these figures exhibit scant evidence of a change in trend.
The headline unemployment rate came in at 4.9 percent and hasn’t exceeded 5.5 percent since February 2015. Private payrolls increased by 142,000 in October, bringing the 12-month moving average to 179,000—down from 250,000 net new jobs created in early 2015. The six-month moving average stands at 153,000 new additions to private payrolls, down from more than 200,000 at the start of the year.
But average hourly earnings jumped 2.8 percent from year-ago levels—the largest increase since 2009. Wage inflation appears to have broken out from the annualized rate of less than 2.25 percent that persisted after the Great Recession.
The combination of President-elect Donald Trump and a Republican-controlled House and Senate puts our original economic outlook in doubt.