Economic Growth Slows Down Despite Increased Labor Pool in US: The Impact on Interest Rates and Inflation

In recent years, the US economy has experienced strong growth, thanks to a variety of factors such as increased net migration flows. This has led to a larger labor pool, which has provided crucial support to the economy and shaped its outlook. Despite this, inflationary pressures have been slow to cool down, leading to a delay in anticipated interest-rate cuts.

The first quarter of 2024 saw impressive economic activity fueled by strong hiring and decreasing inflationary pressures that increased consumer spending and kept growth steady. This trend is expected to continue thanks to shifting demographic trends. As a result, the forecast for 2024 full-year GDP growth has been increased to 1.5% in real terms.

Despite the robust economic activity, inflation remains slow to cool down. While price pressures are expected to ease as the year progresses, it will likely be a slower process than initially forecasted due to the continued strength of the economy and other factors at play. This will impact Federal Reserve policy decisions, with expectations now pointing towards policy rates remaining unchanged for a few months before eventual cuts later in the year.

Overall, while there are some challenges facing the US economy in terms of inflation and interest rates, there are still many positive signs indicating that it will continue to grow steadily in the coming years.