By Bertel Roslev Rasmussen

The US economy is booming. Last Friday's job figures showed that 336,000 new jobs were created in September, surpassing all expectations in the most important US indicator. There is no sign of a slowdown yet in the US economy, which appears to be resilient to the significant interest rate hikes we have seen. The Atlanta Fed model, which provides a running estimate of US real GDP before it is published by the statistical agency, now indicates that the US economy grew by 4.9% in Q3. This doesn't rhyme with recession or anything like it.

At the same time, US job markets remain very hot with widespread labor shortages and job markets in the US remain near the tightest in 50 years. In Europe, too, we are seeing significant labor shortages. In recession-hit Germany, for example, 43% of business leaders surveyed said they are short of labor, which is usually an unheard number in an economy in recession.

Fortunately, there are positive signs of easing wage pressures in the US and Europe, with the latest inflation figures from Europe being lower than expected. However, wage growth is still too high to be compatible with 2% inflation, and current US inflation remains above 3% - both when looking at headline inflation and when removing energy and food.

The strong signals from the economy and, not least, from the labor market continue to create complications for the US and European central banks, where the analysis is that it will not take much further growth for the growth to turn into overheating with new high wage increases and thus even more inflation.

The US Federal Reserve therefore continues to feel its way forward, and at its September meeting it refrained from raising interest rates for the first time since the beginning of 2022. But in return, it signaled that there will probably be another rate hike this year. This went against the market's expectations, where the Fed was eager to signal that we had seen the last rate hike and that it would also indicate that the first rate cuts could come towards the end of the year. Now the hope for lower interest rates has been pushed back to the beginning of 2024.

The theme in the financial markets is therefore currently "higher for longer", where expectations of the strength of the US economy and therefore higher interest rates for longer are gradually being revised upwards. The result in September and early October has therefore been rising interest rates - especially at the long end of the curve - and falling stock prices as well as a stronger dollar.