Are We On the Cusp of a Roaring '20s?

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Resilient might be the perfect word to sum up the U.S. economy over the past five years. It has stayed strong despite some major ups and downs.

And while the numbers look good on paper, how folks perceive their financial situation matters because it shapes how they spend and save. So, getting a handle on how people feel about the economy is key to understanding its overall health.

While inflation pressures continue to strain consumer wallets, the current economic outlook resembles a Goldilocks scenario—balanced and stable.

September's strong payroll growth has pulled the U.S. economy out of recession fears, giving the Federal Reserve a clearer path toward a soft landing.

“We’ve been expecting a soft landing. This just gives us more confidence that it seems to remain in place,” Beth Ann Bovino, chief economist at U.S. Bank, told CNBC after Friday’s nonfarm payrolls report. “It also increases the possibility of a no-landing as well, meaning even stronger economic data for 2025 than we currently expect.”

The jobs report far exceeded expectations, with businesses and the government adding 254,000 payrolls, significantly surpassing the Dow Jones forecast of 150,000.

Hiring surged in September, with employers adding 254,000 jobs and the unemployment rate dipping to 4.1%, signaling continued economic momentum as the Federal Reserve delivered its first interest rate cut in four years.

“It was ‘wow’ across the board, much stronger than expected,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “The bottom line is it was a very good report. You get upward revisions and it tells you the job market continues to be healthy, and that means the economy is healthy.”

Strength in job creation spilled over to wages, as average hourly earnings increased 0.4% on the month and were up 4% from a year ago. Both figures were ahead of respective estimates for gains of 0.3% and 3.8%.

Restaurants and bars led job creation for the month, with the hospitality industry adding 69,000 positions in September after averaging just 14,000 over the previous 12 months. Health care, a consistent leader in job growth, contributed 45,000, while government grew by 31,000. Other gainers included social assistance (27,000) and construction (25,000).  

“A truly monster jobs number today,” Chris Rupkey, chief economist at FwdBonds LLC, wrote in a commentary issued Friday.

“The economic expansion remains on course for now,” he wrote. “The outlook for the economy in the months ahead is quite favorable according to the September jobs report. The economy could end the year on a high note after weathering the growth and employment markets scare a couple of months ago.”

A resilient job market, slowing price increases, and falling interest rates come just before the U.S. presidential election, with the economy and inflation central to voters' concerns. Over two weeks ago, the Federal Reserve made a larger-than-usual half-point interest rate cut, its first in four years, following a summer of sluggish hiring.

Consumer spending in August 2024 went up by 0.2%, which is a bit less than expected. July was stronger at 0.5%. People’s incomes also rose by 0.2%, and the savings rate stayed steady at 4.8%.

Inflation is cooling off too, with prices rising just 0.1% in August, bringing annual inflation down to 2.2%. This is good news for the economy.

A Return to Glory Days

The European finance giant USB says the U.S. is inching closer to a "Roaring '20s" scenario, with a 50% chance of an incoming economic boom. The phrase recalls the 1920s, a decade marked by rapid economic growth, a construction boom, and rising prosperity for families.

At the time, most people may not have fully realized their good fortune—a phenomenon similar to what’s happening now, according to Jason Draho, head of asset allocation Americas at UBS.

While economists worry about potential risks like rising unemployment, recession, or stagflation, Draho said the balance is shifting toward prosperity.

"It’s no longer too soon nor too optimistic to suggest that the US will experience a Roaring '20s economy. It already is by our criteria, with the relevant question being whether these conditions will continue, not whether they will materialize."

Investors are increasingly aligning with the idea of a soft landing. A September survey of 37 economists by the Financial Times found that most do not expect a contraction in the next few years.

Draho concluded, "The way things have been trending, it’s quite possible that by early 2025 only the most pessimistic investors will need rose-colored glasses to see a clear path to a Roaring '20s outcome."

Analysts now see the labor market to be in much better shape than anticipated.

“We’ve witnessed a pretty remarkable economy over the past few years, despite some naysayers and lackluster consumer sentiment,” said Elizabeth Renter, senior economist at NerdWallet. “In an election year, passions run high and every economic report or event can garner intense reaction. But the economic aggregates tell us the U.S. economy has been and is strong.”

Still, Economic Shocks Loom

While the East Coast port strike has been settled -- analysts said it could have cost the U.S. economy $4.5 billion a day -- widespread damage caused by Hurricane Helene in six Southeastern states and the escalating conflict in the Middle East could still put a damper on economic growth.

Also in this edition:

Helene Leaves Deadly and Costly Mark on Western North Carolina

Many families are most concerned about their missing loved ones with hundreds still unaccounted for.

Candidates Clash Over Manufacturing Revival

The two presidential candidates have reignited a familiar debate about how to revive American manufacturing. In truth, no president can control the growth of specific industries.

Global Trade Uncertainty Grows on Trade Policy

As the U.S. presidential election approaches, businesses worldwide are grappling with uncertainty surrounding American trade policy.

Vance Blames Immigration for Housing Costs, But Economists Point to Larger Factors

Sen. JD Vance (R-Ohio) attributes soaring housing costs to a surge in immigration, economists and housing experts say other factors have played a far greater role in driving up home prices.

Challenges Uncovered for Reopening Nuclear Plant

As Holtec International works to reopen the Palisades nuclear plant in Michigan, it finds corrosion cracking in its steam generators "far exceeded" initial estimates.

Over Half of U.S. Counties Now Dependent on Government Aid

Residents in more than half of America's counties now draw a substantial share of their income from the government.

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