Market and economic update: Divergent paths being taken to economic growth

We believe economic data indicate the U.S. economy remains on solid footing. U.S. nonfarm payrolls climbed an additional 214,000 jobs in October, and the unemployment rate dropped to 5.8%. Steady jobs growth may eventually support wage gains, which have averaged around 2% year-over-year growth for the past several months.

The potential for Federal Reserve interest rate increases remains linked to gains in the U.S. jobs market, especially improving wage growth. For now, we expect slow and steady improvement in the jobs market, believe the unemployment rate is unlikely to reach 5.5% until well into 2015, and anticipate slow but steady improvements in wage growth.    

Global economic activity has diverged over the past year, and October purchasing manager index (PMI) surveys indicate the world economies remain on separate paths. Data for the United States, Japan, and United Kingdom remain relatively strong. Eurozone PMI data indicate the region continues to suffer from economic malaise, although economic activity continues at a very slow pace.

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The world’s second-largest nation, China, continues to see slow but positive economic activity. We think Russia and Brazil will see further slowing of economic activity, with falling oil prices impacting both economies and Russia continuing to suffer from economic sanctions. Overall, we believe global economic growth remains likely to follow divergent paths — with stronger growth in the United States, slowing movement in Europe, and a mix of activity across emerging market nations.

For more information, go to https://reserve.usbank.com/insights/market-economic-update-11-10-14.

Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank. 

This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The organizations mentioned in this publication are not affiliates or associated with U.S. Bank in any way.

Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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