US Hard-Landing Narrative May Resurface: Macquarie

Analysts at Macquarie have indicated that while the strong employment report for September has reignited the narrative of “American exceptionalism,” concerns about a possible hard landing for the US economy may emerge once again.

The report highlights a resilient labor market; however, Macquarie cautions that attention may soon shift toward fiscal tightening rather than monetary policy considerations.

“We suspect that the narrative around a US hard landing might resurface,” Macquarie stated.

They clarified that such a scenario is more likely to stem from apprehensions about a potential “fiscal cliff” anticipated in 2025, rather than immediate fears related to the Federal Reserve’s monetary policy decisions.

With the US deficit currently at -7% of GDP, Macquarie expects this issue to be addressed following the 2024 presidential election.

The analysts noted that if any fiscal adjustments take place, they would be more probable under a Kamala Harris administration compared to a Donald Trump administration, suggesting that post-election policies may significantly influence the economic landscape.

Presently, the firm’s focus remains on how the Federal Reserve will react to the latest employment data. They emphasized the importance of monitoring comments from various Fed officials, including those from the Minneapolis, Atlanta, and St. Louis Federal Reserves, regarding their interpretations of the report’s implications.

Macquarie maintains a cautious stance on the medium-term outlook for the US economy, particularly considering that fiscal tightening could reignite worries about a hard landing.