At the beginning of 2019 stock prices rose, after fears of an upcoming recession due to large selling by investors around the end of the year. This has caused some important indices, such as the labor market, to continue pushing the economy in 2019.
True, the economic growth in 2018 at 3%, the highest level in 13 years, may decline in 2019 to 2.5%, but this performance would still be strong, at 2.2% average over nine years.
But what are the strengths of the US economy that will affect the global economy in 2019?
The figures for the monthly job report in 2019 are expected to slow to 160,000 after reaching 200,000 in 2018. But according to analysts, these new figures are enough to reduce overall unemployment.
Salaries will not go down or slow because employers do not need more workers. On the contrary, the unemployment rate of 3.7%, the lowest level in nearly 50 years, will make it increasingly difficult to find them. Vacancies fell near a record 7.1 million in October. This means that there are more than one million vacancies and more open positions than the number of unemployed people, giving workers greater influence over employers.
The labor market has attracted many elder workers on the sidelines, which has kept unemployment from falling. However, the surplus labor supply is becoming very thin, and by the end of 2019 the unemployment rate is expected to fall to 3.3 percent, its lowest level since 1953. This would increase wage growth, which in recent months has risen to a nine-year high of 3.0 % annually.
US purchases and consumption account for nearly 70% of economic activity, and this engine is expected to continue to support growth in 2019. The higher wages should partially offset the low-income gains across the economy as a result of a slowdown in job growth.
The average household level should save US $224 to US $480 on gas next year, depending on how low pump prices will be and whether they will remain there. However, consumer spending should grow by 2.7%, in line with the 2018 increase. Interest rates are expected to rise and banks’ lending standards will become more stringent.
Despite the rapid increase in wages, most economists expect inflation to remain the same next year. The Federal Reserve expects its preferred measure of annual inflation to rise from 1.8% in November to 1.9% by the end of 2019. A key measure that excludes food and volatile energy items is expected.
This is unusual, because companies usually compensate for their higher labor costs by passing them to consumers through higher prices. They may not be able to do so easily for the time being due to trends such as the spread of discounted online shopping and the global economy.
Another reason why inflation will stay modest is that oil and gasoline prices have fallen amid rising supplies. This means that higher salary prices would not be affected by higher retail prices.