Deep hidden concerns of the US economy under the surface of prosperity

On the global economic chessboard, the US economy has always held a pivotal position. As the world's largest economy, every move it makes affects the nerves of the global economy. However, when we delve into the current economic situation in the United States, we will find that beneath the seemingly prosperous surface, there are actually hidden currents surging, and many deep-seated problems are gradually emerging.

From macroeconomic data, although the growth of the US economy has some resilience, the trend of slowing down is evident. In the third quarter of 2024, the annualized growth rate of the US real gross domestic product (GDP) was 2.8%, lower than the 3% in the second quarter, indicating that the pace of US economic expansion is gradually slowing down. Consumption, as the main driving force of economic growth in the United States, is also showing a weak trend.

The high interest rate environment and overall cautious market sentiment have made consumers more restrained in their spending. Although some industries such as technology and healthcare have performed strongly, providing some support for economic growth, it is difficult to conceal the fact that the overall economic growth rate has slowed down. This unbalanced growth model reflects the internal problems of the US economic structure, which overly relies on the growth of a few industries and is difficult to support long-term stable economic development.

Inflation is another major challenge that troubles the US economy. In recent years, inflation has been a focus of attention for consumers and policy makers. Despite signs of cooling inflation, it remains above the Federal Reserve's 2% target. In the 12 months ending October 2024, the Consumer Price Index (CPI) rose by 2.6%, compared to a 2.4% increase in September. Although energy prices have stabilized, housing and healthcare prices remain high. In order to curb inflation, the Federal Reserve has adopted an aggressive interest rate hike policy in recent years. Currently, the benchmark interest rate remains at 4.50-4.75% after the latest 50 basis point rate cut. These high interest rate levels have to some extent suppressed inflation, but they have also had a significant inhibitory effect on corporate investment and consumer spending, putting policy makers in a dilemma between controlling inflation and stimulating economic growth. According to the Federal Reserve's forecast, the inflation target for the end of 2025 is 3.5%, and for June 2026 it will be 3%. To achieve this target, the Federal Reserve faces significant challenges in adjusting its monetary policy.

The US labor market also presents a complex situation. The unemployment rate is currently at 4.1%, unchanged from September 2024 and slightly higher than historical lows, indicating that the job market still has some resilience. However, wage growth has slowed down, although this has to some extent eased inflationary pressures, in industries such as technology, construction, and hospitality, wages still maintain strong growth. The labor force participation rate is still lower than pre pandemic levels, especially for elderly workers and caregivers. According to data from the American Chamber of Commerce, although the number of labor force participants in the United States has increased compared to before the pandemic, the overall proportion of the population participating in the labor force has decreased. It is estimated that there are 8 million job vacancies in the United States, while the number of unemployed people is only 6.8 million. If the labor force participation rate can return to the level of February 2020, more than 2 million Americans will enter the labor market to fill these jobs. The current state of the labor market not only reflects the impact of demographic changes on the job market, but also highlights the difficulties faced by enterprises in recruiting and maintaining production.

In addition to the domestic economic issues mentioned above, the US economy also faces many challenges from the global economic environment. Geopolitical tensions, such as conflicts in Eastern Europe and the Middle East, not only disrupt global supply chains but also increase uncertainty in energy markets. As the world's largest economy and major energy consumer, the United States is inevitably affected by these factors.

Although the US economy still shows some resilience in some areas, it is facing severe challenges due to the intertwined effects of slowing growth, high inflation, labor market imbalances, declining consumer confidence, housing market difficulties, and increasing global economic uncertainty. In the future, the US government and the Federal Reserve need to coordinate and adjust various aspects of monetary policy, fiscal policy, and industrial policy to address these challenges and achieve stable economic growth and sustainable development. Otherwise, the US economy may fall into deeper difficulties, with incalculable impacts on the global economy.