Home | Breaking News | Economy sizzles on cusp of 2018 election, but not all lost ground has been reclaimed

Economy sizzles on cusp of 2018 election, but not all lost ground has been reclaimed

WT24 Desk

After the latest hiring binge and fastest wage growth in nine years, what can the U.S. economy do for an encore?

Keep it going. As good as the economy is right now, it’s been even better. In some cases much better.

By some measures, in fact, the economy is actually worse in 2018 than it was before the onset of the 2007-2009 recession. While the percentage of Americans in their prime who have joined the labor force just hit an eight-year high, for example, it still lags well below the prerecession peak.

What the future beholds for an economic expansion now more than nine years old is unlikely to be revealed by a grab-bag of secondary economic reports this week.

 Instead investors are expected to focus on the outcome of the 2018 elections and the rising prospects that Democrats will seize control of the House for the first time since 2010.

President Trump and Republicans have argued that a Democratic takeover of the House would harm the economy, but with conservatives widely expected to maintain control of the Senate it’s doubtful that Washington will do much to help or harm growth in the short run.

The bigger danger is likely to come from a Federal Reserve bent on raising interest rates and the cost of borrowing. The central bank is increasing the price of money to prevent inflation from rising to dangerous levels, but historically that’s usually resulted in recession.

For now the Fed has employed a gradualist approach. The central bank is almost certain to hold the line this week on interest rates at the end of its two-day meeting on Thursday to assess the health of the economy.

Another rate hike is seen as a virtual certainty in December, however.

“The Fed’s gradualist stance means no rate hike this month, but the text [after the meeting] will justify expectations for a December move,” said economist Avery Shenfield at CIBC Capital Markets.

The one government report this week that could stir up Wall Street is the index of producer prices, an inflationary gauge that usually gets short shrift because it’s not viewed as reliable as other measures.

Yet the producer price index has risen in tandem with more closely followed inflation measures, suggesting that it’s still a decent early warning sign.

More recently, wholesale inflation has slowed to a 12-month rate of 2.6% as of September from a post-recession high of 3.4% at the start of summer. Many economists contend the number will start to creep higher again soon, but it’s certainly not flashing red.

“Despite anecdotal reports of price pressures in the U.S. economy,” said chief economist Robert Dye of Comerica Bank in Dallas, “headline price indexes have been sedate”, according to Market Watch.

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