U.S. Economy Braces for Recession Threat and Stagflation Risks
The U.S. economy is facing a mix of challenges and uncertainties. Rising layoffs and a potential government shutdown threaten to push the country towards a recession, while Trump's control over the Federal Reserve could lead to stagflation. Meanwhile, the California economy is expected to recover despite deportations and labor shortages.
A surge in electric vehicle purchases is anticipated to slow down after federal tax credits expire. The effective tariff rate stands at 11%, with risks from potential levies on pharmaceuticals and the ongoing China trade dispute. The unemployment rate is projected to peak at 4.6% early next year, influenced by retiring baby boomers and restrictive immigration policies. Private-sector payrolls decreased by 32,000 in September, with job growth slowing across various industries. The aerospace sector is expected to benefit from the resumption of normal production at Boeing and Airbus. However, investment in artificial intelligence by large technology firms is predicted to slow down as a 'trough of disillusionment' sets in.
Experts predict a 'stagflation-lite' scenario for the U.S. economy, with modestly elevated inflation and unemployment due to Trump's tariffs and interest rate cuts. The California economy is expected to recover in the fourth quarter and gain momentum next year, despite challenges in food processing and agriculture sectors.
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