Tags: atlanta | fed | fourth | quarter | gdp | growth

Atlanta Fed Lifts Fourth-Quarter GDP Growth View to 2.8 Percent

word gdp written on a paper and charts
(Designer491/Dreamstime)

By    |   Tuesday, 08 January 2019 02:41 PM

The U.S. economy is expanding at a 2.8 percent annualized rate in the fourth quarter after last week's blockbuster jobs report, the Atlanta Federal Reserve’s latest GDPNow forecast model showed.

This was higher than the 2.6 percent pace for fourth-quarter gross domestic product that the Atlanta Fed’s GDP program calculated last Thursday.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2018 is 2.8 percent, up from 2.6 percent on January 3.

The nowcasts of fourth-quarter real consumer spending growth and fourth-quarter real private fixed investment growth increased from 3.6 percent and 2.4 percent, respectively, to 3.8 percent and 2.8 percent, respectively, after the employment situation release by the U.S. Bureau of Labor Statistics on Friday.

The Atlanta Fed's revision comes just days after U.S. employers hired the most workers in 10 months in December while boosting wages, pointing to sustained strength in the economy that could ease fears of a sharp slowdown in growth.

The upbeat employment report from the Labor Department on Friday stood in stark contrast with reports this week showing Chinese factory activity contracting for the first time in 19 months in December and weak manufacturing across much of Europe.

Concerns about the U.S. economy heightened following surveys showing sharp declines in consumer confidence and manufacturing activity last month, which roiled financial markets. Both were seen as more red flags that the economic expansion, now in its ninth year and the second longest on record, is losing steam, Reuters explained.

"The jump in payrolls in December would seem to make a mockery of market fears of an impending recession," said Paul Ashworth, chief economist at Capital Economics in Toronto. "This employment report suggests the U.S. economy still has considerable forward momentum."

Nonfarm payrolls surged by 312,000 jobs last month, the largest gain since February, as employment at construction and leisure and hospitality locations snapped back after being restrained by unseasonably cold temperatures in November.

Job gains were reported across all industries, with the exception of the information sector, which shed employment for the second straight month. Data for October and November were revised to show 58,000 more jobs added than previously reported.

The economy created 2.6 million jobs last year compared to 2.2 million in 2017.

Average hourly earnings rose 11 cents, or 0.4 percent, in December after gaining 0.2 percent in November. That lifted the annual increase in wages to 3.2 percent, matching October's rise, which was the largest in 9-1/2 years.

Wages advanced 3.1 percent on a year-on-year basis in November. Employers increased hours for workers, pushing the average workweek up to 34.5 hours from 34.4 hours in November.

The unemployment rate increased to 3.9 percent from near a 49-year low of 3.7 percent in November as a strong labor market pulled some 419,00 jobless Americans from the sidelines. Fewer workers worked part-time for economic reasons in December.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose two-tenths of a percentage point to 63.1 percent, the highest level since September 2017.

The strong employment report likely keeps the Federal Reserve on course to continue raising interest rates this year, deepening its rift with Wall Street and President Donald Trump, who has chastised the Fed and its chairman, Jerome Powell, repeatedly for the rate increases.

The December jobs gain pushed total U.S. employment above 150 million jobs for the first time. The Labor Department has not been affected by the partial shutdown of the U.S. government and will continue to publish economic data complied by its statistics agency, the Bureau of Labor Statistics.

Data releases from Census Bureau and Bureau of Economic Analysis have been suspended during the shutdown, which started on Dec. 22 amid demands by Trump for $5 billion in funding for a wall on the U.S.-Mexico border.

The robust labor market, especially strengthening wage growth, suggests the economy will continue to expand this year despite the ebb in consumer confidence, continued weakness in the housing market and cooling manufacturing activity.

"Strong job gains coupled with rising wages should act as a tailwind for consumption," said Michelle Meyer, chief economist at Bank of America Merrill Lynch in New York.

Growth forecasts for the fourth quarter are around a 2.6 percent annualized rate, with risks tilted to the downside amid the fading stimulus from the Trump administration's $1.5 trillion tax cut package, a trade war with China and policy uncertainty in Washington.

The economy grew at a 3.4 percent pace in the third quarter. It needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population. Job growth averaged 220,000 per month in 2018. It is expected to slow to around 150,000 per month this year as workers become more scarce.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
The U.S. economy is expanding at a 2.8 percent annualized rate in the fourth quarter after last week's blockbuster jobs report, the Atlanta Federal Reserve’s latest GDPNow forecast model showed.
atlanta, fed, fourth, quarter, gdp, growth
803
2019-41-08
Tuesday, 08 January 2019 02:41 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved