Employment gains outpace inflation's costs

<p>Kia ora,</p><p>Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news, so far the sky is not falling despite the higher benchmark interest rates</p><p>First in the US, the actual number of <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20232115.pdf" target="_blank"><strong>new initial claims for jobless benefits</strong></a> fell to just under 175,000 last week, emphasising the continuing strength of the American labour market. True, the seasonally-adjusted version rose marginally, but even so, this data has been falling since July and is almost back to the very low levels they had a year ago. It might not be 'news' but it is an impressive run, one that makes it much harder for the Fed to meet its inflation-fighting mandate even if it is acing its full employment one.</p><p>They also <a href="https://www.bea.gov/news/2023/gross-domestic-product-third-estimate-corporate-profits-revised-estimate-second-quarter" target="_blank"><strong>released</strong></a> their third and 'final' Q2-2023 GDP result today, confirming it rose at an annual rate of +2.1%, a minor slip from the Q1 rate of +2.3%. (That took their GDP on a nominal basis to US$27.1 tln, up +5.9% from a year ago or a gain of +US$1.5 tln. Inflation accounted for US$0.9 tln of that however.) It is likely that the real, inflation adjusted expansion for Q3 will be very much faster than Q2, perhaps twice as fast with a <a href="https://www.atlantafed.org/cqer/research/gdpnow" target="_blank"><strong>+4.9% growth</strong></a>.</p><p>But one American sector remains firmly in the doldrums, their residential real estate sector. <a href="https://www.nar.realtor/newsroom/pending-home-sales-tumbled-7-1-in-august" target="_blank"><strong>Pending home sales</strong></a> for August fell a whopping -18.7% from a year ago with a very sharp fall in August from July. No a