The economy grew at a 2.1% annualized rate in 2Q23, in-line with last quarter\u2019s 2.2% pace. Consumption grew a modest 0.8% saar, while private domestic final sales increased at a 1.7% rate. Business fixed investment spending also grew 5.2%, its best pace since 1Q22. Further, comprehensive GDP revisions painted a picture of private sector resilience and improved household savings with softer consumption growth than previously reported. The economy is clearly showing resiliency in the face of monetary tightening, but strains on the consumer and business spending may temper growth in the coming quarters.<\/p>\n\n\n\n
The September Jobs report showed that the labor market remains resilient, with strong hiring momentum but a notable lack of upwards wage pressure. Non-farm payrolls rose by 336K, well above expectations of 170K, with upward revisions of 119K jobs to the prior two months. Job gains were widespread but most significant in the sectors that have had the hardest time finding workers, pointing to a continued normalization in the labor market. Average hourly earnings rose by a modest 0.2% m\/m, bringing the year-over-year rate down to 4.2%, despite strong job gains. The unemployment rate remained at 3.8% as modest labor force growth was matched with a gain in workers. Overall, this report clearly shows a picture of labor market strength, but also underscores the economy\u2019s ability to maintain unemployment below 4% with only moderate wage growth.<\/p>\n\n\n\n
Despite many macro risks threatening the U.S. economy, the 3Q earnings season should be a bright spot for investors. We currently project operating earnings per share (EPS) of $54.79, which would represent y\/y earnings growth of 8.8% and a q\/q decline of -0.1%, if realized. Margins are expected to drive the lion\u2019s share of profit growth, supported by easing input and wage costs. Revenue growth is also expected to contribute, but may come under pressure amidst easing inflation, a challenged consumer and weakening global growth.<\/p>\n\n\n\n
The September CPI report was mostly in-line with expectations with core inflation continuing to show signs of moderation. Headline CPI rose by 0.4% m\/m and 3.7% y\/y, slightly hotter than expected, while core CPI rose by 0.3% m\/m and 4.1% y\/y. In the details, elevated energy prices as well as shelter and transportation costs buffeted headline inflation, whereas lower goods prices allowed some easing in the core measure. Core services inflation ex-shelter also saw progress, but remains dominated by the soar in car insurance premiums this year. Energy may contribute to bouts of headline volatility in the coming months, but continued progress on core disinflation and rising real yields make another rate hike from the Federal Reserve all the less necessary.<\/p>\n\n\n\n
In a widely anticipated move, the FOMC voted to leave the federal funds rate unchanged at a range of 5.25% to 5.50% at its September meeting. The updated \u201cdot plot\u201d remained hawkish, with the median FOMC member now expecting only two cuts in 2024. This likely stems from the Fed\u2019s expectation for continued economic resilience. In the Summary of Economic Projections, real GDP growth expectations rose meaningfully for 2023 and 2024. Elsewhere, the median forecast for the unemployment rate fell to 3.8% while the core PCE forecast ticked lower. Overall, the Fed appears to be forecasting a \u201csoft-landing\u201d scenario. However, with plenty of headwinds facing the current economic expansion, the risk of overtightening could challenge this outlook.<\/p>\n\n\n\n
This weekly update provides a snapshot of changes in the economy and markets and their implications for investors.<\/a><\/strong><\/p>\n\n\n\n \u2014<\/p>\n\n\n\n Originally Posted October 16, 2023 \u2013 Economic Update<\/a><\/p>\n\n\n\n This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor\u2019s own situation.<\/p>\n\n\n\n Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.<\/p>\n\n\n\n INFORMATION REGARDING MUTUAL FUNDS\/ETF: Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing. The summary and full prospectuses contain this and other information about the mutual fund or ETF and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or download<\/a> it from this site. Exchange Traded Funds: Call 1-844-4JPM-ETF or download<\/a> it from this site.<\/p>\n\n\n\n J.P. Morgan Funds and J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA<\/a> FINRA\u2019s BrokerCheck<\/a><\/p>\n\n\n\n INFORMATION REGARDING COMMINGLED FUNDS: For additional information regarding the Commingled Pension Trust Funds of JPMorgan Chase Bank, N.A., please contact your J.P. Morgan Asset Management representative.<\/p>\n\n\n\n The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.<\/p>\n\n\n\n INFORMATION FOR ALL SITE USERS: J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.<\/p>\n\n\n\n NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE<\/p>\n\n\n\n