US Macroeconomic Report - November 2024
In November, inflation rose by 0.17%, increasing from 2.4% in October to 2.57%, while the unemployment rate held steady at 4.1%, fuelling higher interest rate expectations. This led to a 0.29% rise in short-term interest rates and a 0.32% increase in long-term interest rates.
Despite this monthly increase, inflation has fallen by 0.67% over the past year, and unemployment has risen by 0.3%, contributing to a significant decline in short-term interest rates over the last 12 months. This can be explained by fears of a short-term slowdown being higher relative to last year's expectations. Meanwhile, on a year-on-year basis, long-term rates have remained stable due to fiscal policy uncertainty and the pricing in of a higher neutral interest rate level.
This month, our U.S. economic cycle composite indicator continued to decline, indicating conditions characteristic of an economic cycle peak deceleration. Currently, 43% of our indicators signal a cycle top, 0% signal a cycle bottom, and 57% remain neutral. On a month-to-month basis, sentiment increased the most, increasing by 2.67%, whereas labour market decreased the most by -2.47%. On a year-on-year basis, sentiment improved the most, increasing by 11.71%, whereas the labour market deteriorated the most, decreasing by -6.97%.
Our indicators suggest that while economic fundamentals are deteriorating from very high levels, sentiment about future economic growth remains elevated and continues to improve. The market appears to have priced in expectations that the labor market and inflation will stabilize at current levels, maintaining the same rate of economic growth. Any deviation from these expectations—such as weaker labor market conditions or higher inflation—could result in significant market corrections.
The box plot above illustrates the current status of the components comprising our U.S. economic cycle composite indicator relative to their historical ranges. Sentiment, labour market conditions, and price pressures (inflation) remain in peak cycle territory, while all other components are above their median historical values, reflecting an economy that continues to run hot. In this environment, we strongly believe it would be a significant error for the Federal Reserve to reduce interest rates preemptively, as such a move could undermine progress toward sustained stability and risk reigniting inflationary pressures.
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The full report is available for download at the bottom of this page. Inside, you’ll find a comprehensive breakdown of each component contributing to our macroeconomic indicators, providing detailed insights into the factors driving current economic conditions.