November’s US presidential election is near at hand and the country’s economy remains a key issue for voters.
The US Labor Department’s Bureau of Labor Statistics (BLS) reported that the US economy added more than 250,000 new jobs in September – exceeding expectations. To date, 16m jobs have been created under the Biden-Harris Administration.
On her regular appearance on Sirius XM’s The Business Briefing programme, London Business School’s Dr Linda Yueh discussed job creation and the prospects for the US economy.
The Business Briefing’s host Janet Alvarez noted the importance of the record number of jobs that had been created in the US, and, commenting on the wider strength of the country’s economy, the US is, she observed, dramatically pulling ahead of other leading economies. For example, 16 years ago the US and the eurozone economies were roughly the same size. Today, the American economy is nearly twice the size of the eurozone.
US, the engine of the world economy
Is the US, asked Alvarez, now the engine for the world economy?
Dr Yueh said that the US employment figures, and the overall strength of the economy, pointed to its enduring strength. By contrast, if one were to look at China and that country’s current record on employment, and the relative weakness of China’s consumer confidence, China’s economy is not as robust as the US.
Technology leads the way
The recent record growth in employment, observed Yueh, underscores several important aspects of the country’s economy. Most notably, the US is a huge driver of innovation which continues apace, principally driven by AI and the technological needs of the green economy. One doesn’t see the same level of effective commitment to cutting-edge technology in other countries.
Alvarez asked how long would this innovation-led growth spurt might continue, to which Dr Yueh said that while the enthusiasm for green technologies would continue to grow, helped by such measures taken by the US government as the Inflation Reduction Act, it would take some time for AI to reveal how the technology will help enhance productivity.
Supply-side shocks and the impact of the Middle East conflict
The dockworker strike at US east and Gulf coast ports has turned out to be brief, minimising market impacts. However, there will still be an impact on supply chains. What other supply chain concerns is the global economy presently facing, particularly when one considers oil exports and the potential for a further escalation of the Israel-Hezbollah-Iran conflict?
Dr Yueh said that it was good news that strike action has been short-lived with talks postponed until January. However, Yueh noted that it was a delicate time for the global economy in terms of supply chain disruption. Noting the impact that Covid and earlier conflicts in the Middle East had had on supply chains, there is always a concern, she observed, that there may be further supply-side shocks considering the present conflict in the Middle East.
Noting the 51st anniversary of the Yom Kippur War, and the embargo put in place by the Organization of Arab Petroleum Exporting Countries (OAPEC), aimed at inflicting economic hurt on the countries that had supported Israel during the 1973 conflict, Dr Yueh said that the circumstances have changed considerably since that time.
“OPEC was a much bigger player back then, and today the US has access to a greater diversity of energy sources such as renewables and fracking.”
Despite the significantly changed global environment, an escalation of the conflict in the Middle East could, she said, have significant economic ramifications for the region and the global economy.
To listen to the full discussion on Sirius XM’s Business Briefing programme, click here
