What to make of the economic data that shows strength in the U.S. economy — so much strength that it means a rate hike is coming, right on the ostensible Fed schedule for this month?
To recap: Consumer spending is logging growth not seen in the past few years, as measured sequentially. Employers are hiring in an already tight market. This last point is important, as the ADP National Employment Report showed that private workforce positions bumped up by 216,000 jobs in November, which was way better than the 165,000 jobs that had been estimated. We’ll see even more important jobs data when the Labor Department issues its own stats tomorrow (Dec. 2), and that data gives a wider, panoramic view of jobs as it includes both private and public hiring trends. All of this translates into a GDP quickening that is better than had been seen in a few years.
Donald Trump, therefore, may inherit an economy more robust than he might have bargained for — and certainly as measured against the rhetoric of his own campaign.
The big elephant in the room is inflation. Will inflation grow enough to choke consumer spending, as hiring continues and prices rise? Maybe not. It could be the case that consumer spending proceeds apace as Trump’s proposals to trim taxes and also ratchet up infrastructure spending get the thumbs-up from a Republican Congress. Inflation is at 1.4 percent, not enough to trigger further rate hikes on worries the economy might overheat.
Let’s not discount the wealth effect of the fact that stocks are hitting new highs, seemingly without end.
The upshot? The great consumer spending wave will keep rolling on.