At the start of this week, sentiment about the U.S. economy was mostly pessimistic.
However, when the employment report came out showing stronger‑than‑expected results, together with solid results from Nvidia and Walmart – all of this happened roughly within 18 hours – could the economy be better than people thought?
It’s tangled. Let’s break it down together.
The U.S. labor market began cooling earlier in the summer. From May to August, the average monthly job gain stood at about 31 thousand, roughly a fifth of the pace from the previous year. September sent its signal, though the report came out seven weeks late, its interpretation is not unambiguous.
Preliminary data for September showed an increase of 119 thousand jobs, exceeding economists’ forecasts by about 50 thousand. But unemployment rose, and the picture of the preceding months became even more tangled: for July, the gain was revised from 79 thousand to 72 thousand, and for August – from a rise to 22 thousand – now recorded a decrease of 4 thousand.
Overall, employment growth in September suggests that the labor market did not roll over before the end of the period, but the main trends hardly changed: we still have moderate hiring and slow layoffs, job growth is confined to a few sectors, and there is minimal room for those seeking work.
«I don’t think anyone should be celebrating what we saw in the September employment report,» said Heather Long, Chief Economist at Navy Federal Credit Union, in an interview with CNN. «I view it as a relief that the situation didn’t get worse and that 119,000 jobs were added; but also remember: almost every number lately is revised downward.»– Heather Long
Mark Zandi, Chief Economist at Moody’s Analytics, underscored concerns about the state of the labor market – the same as before the report’s release.
«The economy is facing difficulties in creating jobs. The unemployment rate is low, but there is now some pressure,» – said Zandi, adding that the closer you get to 5%, the greater the risk of an amplifying negative cycle that could lead to a recession.– Mark Zandi
«Today’s employment report adds more confusion than clarity to an extremely foggy backdrop,» – said Mike Reed, RBC’s senior U.S. economist.– Mike Reed
What is a K-shaped economy?
In short: a K-shaped economy means that different groups of people experience economic ups and downs differently. The piece references the consumer context: the group with incomes over $100,000 spends more, while others cut back as prices rise.
They also explain that a K-shaped economy describes the nuances that show up in the overall state: American households with incomes over $100,000 spend more often, while others face constraints.
What is a “K-shaped economy”? 1:15. Source: CNN
Your personal financial situation also affects how you assess the economy. If your job pays well and carries a moderate risk of layoffs, you may currently feel more comfortable and spend more. If not – the situation may look quite different.
Right now many people find themselves in a category where debts are rising and finding a new job remains challenging. In this context, the administration’s policies and its decisions on housing costs, family support, and tariffs are discussed as both potentially beneficial and controversial steps. Economists disagree on their effectiveness, but a noticeable wave of pessimism is growing.
It is impossible to predict exactly how events will unfold. The economy in recent years has repeatedly sent conflicting signals. Yet one thing is clear: many Americans do not feel fully confident in this economy and are waiting for the moment when expenses become more affordable for most people.