CFO Focus: Robust employment propels the current economy

High leverage and trade wars are key risks in the current environment.

In my October market outlook, I incorrectly projected that the U.S. economy would be entering recession by December. While manufacturing and business investment have continued to slow consistently, our robust employment picture continues to lead us forward.

Indeed, the November jobs report was solid across the board. It featured a large payroll increase, better-than-expected wage increases, a lower unemployment rate and a higher workforce participation rate. Simply put, it was a great report. Moreover, since economic growth is now being powered predominantly by consumer spending, a great employment report is a good sign.

However, I continue to believe that further economic expansion rests precariously on a great deal of leverage for consumers, business and the federal government. According to the St. Louis Fed, total public debt sits at 103.2% of gross domestic product as of June 30. . Because we know the federal budget deficit has increased since the end of the second quarter and consumer and business borrowing remains robust, the ratio is probably higher as we come to the end of 2019. High leverage means that relatively small downturn can have much larger negative effects.

 

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