It's too early to talk about an economic "soft landing"

At the beginning of the year, US Treasury Secretary Yellen declared that the US economy had achieved a "soft landing". But by analyzing relevant economic indicators, it can be found that this statement is too early. One is that although inflation in the United States has significantly eased, there is still a certain distance between it and the Federal Reserve's inflation target. Secondly, the employment willingness of American workers is not strong, and the labor participation rate has decreased. Thirdly, since the second half of 2023, the decline in US trade volume reflects weak domestic demand for commodity consumption.

US Treasury Secretary Yellen claimed in an interview that the US economy has achieved a long-term pursuit of a "soft landing", which is unusual in history. Her main basis is that the recent US inflation rate has dropped to around 3%, while the labor market situation is still stronger than expected. According to data released by the US Bureau of Labor Statistics, the seasonally adjusted non farm employment population in the United States increased by 216000 in December 2023, exceeding market expectations of 170000 and the highest increase since September 2023.

On the contrary, former US President Trump stated in a recent interview program that he predicted the US economy would collapse. It is necessary for us to assess the operational situation of the US economy based on relevant economic indicators.

Yellen's claim that the US economy has achieved a "soft landing" is somewhat premature. Firstly, although inflation in the United States has significantly eased, the inflation rate of the Consumer Price Index (CPI) is still above 3%, and the inflation rate of private consumer expenditure prices (PCE) is also significantly higher than 2%, which is still some distance from the Federal Reserve's inflation target.

According to recent data released by the US Bureau of Labor Statistics, the US CPI in December 2023 increased by 3.4% year-on-year, slightly recovering from the previous two months. More importantly, the core CPI of the United States has risen by about 4% year-on-year, and the core inflation rate of PCE is also above 3%, both of which are higher than their corresponding overall price level increases. This reflects the complexity and governance difficulty of this round of inflation in the United States. If we want to achieve the 2% inflation target, the Federal Reserve will need to continue implementing a tighter monetary policy, at least making it difficult to make a decision to relax monetary policy in the short term. In addition, with the current severe debt burden in the United States, the two parties are constantly arguing over the budget. These will have an impact on the economic performance.

Secondly, the state of the US labor market may not be as good as the number of new non-farm employment shows. The US Bureau of Labor not only released the number of new non-farm workers, but also released the total number of labor force members and those aged 16 and above. Based on the data from December 2023, the total number of people aged 16 and above employed after seasonal adjustment decreased by 683000 compared to the previous month, which is significantly deviating from the direction of the new non-agricultural employment population. According to data from the US Census Bureau, the US population grew by 1.75 million in 2023, reaching approximately 336 million. Based on this estimate, the total population of the United States increased by approximately 443000 people in the fourth quarter of 2023. However, data from the Bureau of Labor Statistics shows that the labor force in December decreased by 676000 people compared to the previous month and by 446000 people compared to September. Along with the increase in population, the number of labor force and the total number of employed people aged 16 and above have significantly decreased, indicating a decrease in labor participation rate and a weak willingness of workers to seek employment.

In addition, since the second half of 2023, there has been a decline in US trade volume. According to data recently released by the United States Bureau of Economic Analysis, the total import value of the United States from January to November 2023 decreased by 3.6% compared to the same period last year, of which the import value of goods decreased by 5.0% year-on-year. After excluding the impact of the decrease in imported product prices, the import value of goods decreased by 2.1%; And most months are in a downward trend. The decrease in imports of goods from the United States indicates a decrease in domestic demand for imported products, reflecting weak demand for commodity consumption in the United States.

In 2023, the World Federation of Large Enterprises in the United States repeatedly predicted that the US economy would experience a recession. The Leading Economic Index (LEI) compiled by the World Federation of Large Enterprises has been declining for some time and has exceeded its warning threshold for recession based on historical experience. Therefore, it is predicted that in the first half of 2024, the US GDP may experience two consecutive quarters of month on month negative growth, leading to a technical recession.

At the beginning of the year, US Treasury Secretary Yellen declared that the US economy had achieved a "soft landing". But by analyzing relevant economic indicators, it can be found that this statement is too early. One is that although inflation in the United States has significantly eased, there is still a certain distance between it and the Federal Reserve's inflation target. Secondly, the employment willingness of American workers is not strong, and the labor participation rate has decreased. Thirdly, since the second half of 2023, the decline in US trade volume reflects weak domestic demand for commodity consumption.

US Treasury Secretary Yellen claimed in an interview that the US economy has achieved a long-term pursuit of a "soft landing", which is unusual in history. Her main basis is that the recent US inflation rate has dropped to around 3%, while the labor market situation is still stronger than expected. According to data released by the US Bureau of Labor Statistics, the seasonally adjusted non farm employment population in the United States increased by 216000 in December 2023, exceeding market expectations of 170000 and the highest increase since September 2023.

On the contrary, former US President Trump stated in a recent interview program that he predicted the US economy would collapse. It is necessary for us to assess the operational situation of the US economy based on relevant economic indicators.

Yellen's claim that the US economy has achieved a "soft landing" is somewhat premature. Firstly, although inflation in the United States has significantly eased, the inflation rate of the Consumer Price Index (CPI) is still above 3%, and the inflation rate of private consumer expenditure prices (PCE) is also significantly higher than 2%, which is still some distance from the Federal Reserve's inflation target.

According to recent data released by the US Bureau of Labor Statistics, the US CPI in December 2023 increased by 3.4% year-on-year, slightly recovering from the previous two months. More importantly, the core CPI of the United States has risen by about 4% year-on-year, and the core inflation rate of PCE is also above 3%, both of which are higher than their corresponding overall price level increases. This reflects the complexity and governance difficulty of this round of inflation in the United States. If we want to achieve the 2% inflation target, the Federal Reserve will need to continue implementing a tighter monetary policy, at least making it difficult to make a decision to relax monetary policy in the short term. In addition, with the current severe debt burden in the United States, the two parties are constantly arguing over the budget. These will have an impact on the economic performance.

Secondly, the state of the US labor market may not be as good as the number of new non-farm employment shows. The US Bureau of Labor not only released the number of new non-farm workers, but also released the total number of labor force members and those aged 16 and above. Based on the data from December 2023, the total number of people aged 16 and above employed after seasonal adjustment decreased by 683000 compared to the previous month, which is significantly deviating from the direction of the new non-agricultural employment population. According to data from the US Census Bureau, the US population grew by 1.75 million in 2023, reaching approximately 336 million. Based on this estimate, the total population of the United States increased by approximately 443000 people in the fourth quarter of 2023. However, data from the Bureau of Labor Statistics shows that the labor force in December decreased by 676000 people compared to the previous month and by 446000 people compared to September. Along with the increase in population, the number of labor force and the total number of employed people aged 16 and above have significantly decreased, indicating a decrease in labor participation rate and a weak willingness of workers to seek employment.

In addition, since the second half of 2023, there has been a decline in US trade volume. According to data recently released by the United States Bureau of Economic Analysis, the total import value of the United States from January to November 2023 decreased by 3.6% compared to the same period last year, of which the import value of goods decreased by 5.0% year-on-year. After excluding the impact of the decrease in imported product prices, the import value of goods decreased by 2.1%; And most months are in a downward trend. The decrease in imports of goods from the United States indicates a decrease in domestic demand for imported products, reflecting weak demand for commodity consumption in the United States.

There are unstable factors in US finance, the US dollar, and US bonds, and creating an economic crisis is an important means for US conglomerates to harvest global wealth. Therefore, it is not easy for the US to achieve a soft landing. Therefore, it is premature for Yellen to claim that the US economy has already achieved a soft landing.