We’ve said it once and we’ll say it again: Even if it defies all logic, never underestimate the strength of the U.S. economy.
What happened: The American economy created 353,000 jobs in January, which was *checks notes* roughly double the number expected by economists. Tom Simons, U.S. economist at Jefferies, told the Financial Times the data left him “near speechless.”
- Annual wage growth also ticked up, with average hourly earnings among private workers in the U.S. jumping by 4.5%, outpacing inflation by a full percentage point.
Why it matters: This week, U.S. Federal Reserve Chair Jerome Powell crushed any hopes that an interest rate cut would come in March, but unbelievably strong economic data has now shaken certainty around a May cut, leaving borrowing costs high and the USD strong.
- While the U.S. is so far trending towards a soft landing, Powell said he needs to see more data before he’s convinced rate hikes have done enough to tame inflation.
Big picture: The universe might not revolve around America, but the global economy sure does. The U.S. accounted for more than a quarter of the world’s economic output in 2022, as it is a driving force behind international trade, investment, innovation, and financial markets.
- Last year, the U.S. economy grew by a staggering read of 3.1%, securing America’s position as the key driver of global growth… but not everyone is along for the ride.
In Canada: Douglas Porter, BMO’s chief economist, told the Financial Post the “surprising resiliency” in the U.S. economy has spilled over into some sectors in Canada, but the Bank of Canada said growth is expected to stay close to zero for the first quarter of 2024.—SB