by The Gould Asset Management Team

Note: This post is an excerpt from Gould Asset Management’s Economic and Market Review for the First Quarter of 2024. The excerpt is posted here for the benefit of our blog subscribers.

US Targets Soft Landing in 2024

The US economy grew at a 3.4% annualized rate in the fourth quarter of 2023, underpinned by robust consumer spending and business investment.

The labor market remains healthy, with employers adding 303,000 jobs in March and more workers entering the job market. The headline unemployment rate decreased to 3.8%, marking a streak of 26 months below 4%, the longest such stretch since the late 1960s.

Consumer spending, which accounts for more than two-thirds of US GDP, increased by 0.8% in February, the largest increase since January 2023. Consumer confidence held steady in March as waning fears of a recession were replaced with anxiety about the state of politics heading into this year’s presidential election.

US manufacturing activity rebounded in March, with the ISM Manufacturing index jumping 2.5% and finally crossing the expansion threshold of 50% after 16 months in contraction territory. Factory production and new orders increased, but employment in the sector remained subdued.

The Fed Holds Steady Again

The Federal Reserve maintained its federal funds target range between 5.25% and 5.50%, marking the fifth consecutive meeting without a change. Despite the slight uptick in inflation, Fed officials still expect to make three 0.25% rate cuts this year, but reduced the number of forecasted cuts in 2025 from four to three.

The past two months of inflation data haven’t significantly altered the Fed’s view that inflation is coming down to its target of 2%, but the figures also haven’t given Fed officials enough confidence to begin cutting rates now. As a result, Fed Chair Jerome Powell did not provide any insight into the timing of the first rate cut other than that it is on track for some time this year.

Updated Fed projections show a slight increase in inflation from 2.4% to 2.6% and a considerable upward revision to economic growth from 1.4% to 2.1% this year. Fed policymakers are basically split on the number of rate cuts this year, with 10 seeing three or more cuts and 9 expecting two or fewer cuts.

To continue reading, please see our entire Economic and Market Review.