Just how strong is the recovery in the US? That’s the question everyone’s asking as global growth slows and the US offers the only glimmer of hope among the major economies.
Economic growth in America has averaged 4 per cent over the past two quarters after a slow start to the year and wages are growing, albeit slowly. Headline unemployment has fallen steadily and is now near six-year lows.
The Federal Reserve is expected to raise interest rates (we think in mid-2015) for the first time since 2006. This will be acknowledgement that policymakers are finally satisfied with the progress made in job creation and that they believe the economy is back on firmer ground.
But there is also a conflicting narrative about employment. The recovery hasn’t been so good for the fresh graduate who is struggling to find work or can only get minimum-wage or part-time jobs.
Nor has it been fantastic for members of the so-called “boomerang generation” who have been working a few years but still rely on mum and dad for financial support. By one estimate, around one in five Americans in their 20s and early 30s is living with their parents.
The dollar has strengthened against every other G10 currency this year
As we look ahead to 2015 it is a close call as to which narrative will prevail. We’ve been closely following US unemployment data that accounts for those stuck in part-time and casual jobs, the so-called U-6 measure of unemployment. This broader gauge has been improving steadily since 2010 but is still higher than pre-crisis levels.