U.S. job market improving amid potential disruptions: economists

CHICAGO, Nov. 18 (Xinhua) -- The U.S. job market has been recovering despite pandemic waves, inflation woes and supply chain strains, but these and other barriers could threaten broad and sustained economic momentum, according to the University of Michigan (UM).

With October seeing more than a half-million payroll jobs added, the strongest reading since July, UM economists forecast that demand for goods and services is likely to remain strong, albeit with a slight slowdown early next year, leading to continued payroll job gains and rapid declines in the jobless rate, according to UM's U.S. Economic Outlook report released on Thursday.

The report revealed some volatility in the economy: U.S. real gross domestic product (GDP) growth over the summer quarter plunged to 2 percent at an annual rate, as the pace of service consumption slowed and vehicle sales dropped, but is expected to rebound to 3.6 percent by year's end.

The report predicted slowed consumption growth early next year amid another pandemic wave but businesses should be able to finally restock inventory. The researchers expect real GDP growth to accelerate to an average quarterly pace of over 5 percent in the middle of next year but fall to 2.2 percent by the end of 2023.

The report also predicted that U.S. unemployment will fall from 4.5 percent by the end of this year to 3.7 percent by the end of next year and 3.5 percent by the end of 2023.

U.S. job gains are expected to reach 455,000 per month in the final quarter of this year and 323,000 in the first quarter of next year. The economists attributed the slowing to another wave of COVID-19 infections. Job gains should accelerate over spring and summer 2022 and then gradually moderate to 184,000 per month by the end of 2023 as the economy reaches full employment.

The economists expect supply-side disruptions and inflation to ease over the next two years. The Federal Reserve would likely act to prevent prolonged inflation but a tightened monetary policy could stunt real economic growth. Conversely, if supply-chain strains are resolved faster than they anticipate, the Fed could raise interest rates at a slower pace and fuel faster growth.

Real disposable income spiked 6.2 percent in 2020, thanks to federal income replacement programs. These stimulus and benefit programs along with accelerating wage growth are continuing to boost disposable incomes this year, though that is expected to shrink to 3.3 percent next year as government income replacements cease. Consumption has exploded in 2021 with the improving pandemic situation and rising incomes, with a higher than normal savings rate owing to federal benefits.