Analysts have revised their forecasts for the US economy, now anticipating a 2% expansion in GDP for the year, signaling delayed interest rate cuts by the Federal Reserve, albeit with expected reductions in June or July and possibly more later. This revision stems from the economy’s continued strength, highlighted by a robust growth and labor market. Federal Reserve Chair Jay Powell is set to emphasize caution regarding inflation and the economy in upcoming congressional hearings.

The market’s positive sentiment is fueled by strong consumer spending, backed by impressive job numbers. Despite a slight dampening in expectations for an immediate rate cut due to the economy’s performance under President Joe Biden, fears of inflationary pressures influence the Federal Reserve’s cautious stance. The decision in the March rate-setting vote will offer further insights into the Fed’s monetary policy.

In employment trends, US job openings in January remained high at approximately 8.9 million, illustrating a solid labor market. While there was a minor decrease from the previous month and job openings have been gradually declining from their peak in March 2022, the numbers are still significantly high. The Labor Department also noted a slight reduction in layoffs and in the number of workers quitting jobs, suggesting a healthy employment situation. This resilience is evident despite multiple rate hikes by the Federal Reserve aimed at controlling inflation.

The labor market strength is further underscored by an average monthly addition of 244,000 jobs over the past year, and the February jobs report is expected to reflect continued job growth with an unemployment rate below 4%. This enduring strength of the US job market, even amid rising interest rates, demonstrates a steady adjustment from the high levels of 2022 and early 2023.