Contents
Consumer Influence on the U.S. Economy
The current resilient labor market, however, can tell us only about how the economy is doing now, she said, but it doesn’t tell a whole lot about where it might be headed next.
The ebb and flow of the U.S. economy now largely rests in the hands of consumers, particularly with the Federal Reserve embarking on a spree of interest rate cuts. This perspective comes from Lauren Goodwin, who serves as the economist and chief market strategist at New York Life Investments. In a missive to clients sent on Tuesday, she expounded upon how elevated fed-funds rates have already set off a chain reaction in the economy.
Economic Dominoes
That’s the view of Lauren Goodwin, economist and chief market strategist at New York Life Investments, who said in a Tuesday client note that restrictive fed-funds rates already pushed down some of the “dominoes” of the economy, starting with housing, manufacturing, services, and then pressuring profit margins.
Goodwin illustrated this domino effect with a particular focus on sectors like housing, manufacturing, and services. These areas have felt the squeeze, subsequently affecting profit margins. Such trends emphasize how interconnected various facets of the economy are.
The Lagging Indicators: Labor Market and Consumers
The labor market and the consumer are the lagging most indicators of the economic cycle,” Goodwin wrote.
However, Goodwin underscores that both the labor market and consumer activity are trailing indicators. This means they often reflect the state of the economy after other sectors have already shown changes. Interestingly, while today’s labour market may appear resilient, it does not offer much foresight about future economic conditions.
Factors Influencing Consumer Behaviour
Consumers wield substantial influence, especially within the context of an economy experiencing reduced interest rates. Their spending activities will contribute to shaping economic trends distinctly. For additional reading on the labor market’s impact on economic cycles, consider this resource.
Summary
- Federal Reserve’s interest rate cuts shift the economic focus to consumer behaviour.
- Elevated fed-funds rates have already impacted sectors like housing and manufacturing.
- Labor market strength is more reflective of current rather than future economic trends.
Navigating the current economic landscape requires astute attention to consumer habits and spending. As Goodwin aptly notes, the picture painted by today’s labor market doesn’t necessarily predict what lies ahead for the economy.
