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'US job market improving amid potential disruptions'

Washington, Nov 19 (IANS) The U.S. job market has been recovering despite the ongoing Covid-19 pandemic, inflation woes and supply chain strains, but these and other barriers could threaten broad and sustained economic momentum, according to a report released by the University of Michigan (UM).

With October seeing more than a half-million payroll jobs added, the strongest reading since July, UM economists forecast that demand for goods and services is likely to remain strong, albeit with a slight slowdown early next year, leading to continued payroll job gains and rapid declines in the jobless rate, according to the university's US Economic Outlook report.

The report revealed some volatility in the economy: US real gross domestic product (GDP) growth over the summer quarter plunged to 2 per cent at an annual rate, as the pace of service consumption slowed and vehicle sales dropped, but is expected to rebound to 3.6 per cent by year's end, reports Xinhua news agency.

The report predicted slowed consumption growth early next year amid another pandemic wave but businesses should be able to finally restock inventory.

The researchers expect real GDP growth to accelerate to an average quarterly pace of over 5 per cent in the middle of next year but fall to 2.2 per cent by the end of 2023.

The report also predicted that US unemployment will fall from 4.5 per cent by the end of this year to 3.7 per cent by the end of next year and 3.5 per cent by the end of 2023.

US job gains are expected to reach 455,000 per month in the final quarter of this year and 323,000 in the first quarter of next year.

The economists attributed the slowing to another wave of Covid-19 infections. Job gains should accelerate over spring and summer 2022 and then gradually moderate to 184,000 per month by the end of 2023 as the economy reaches full employment.

The economists expect supply-side disruptions and inflation to ease over the next two years. The Federal Reserve would likely act to prevent prolonged inflation but a tightened monetary policy could stunt real economic growth. Conversely, if supply-chain strains are resolved faster than they anticipate, the Fed could raise interest rates at a slower pace and fuel faster growth.

Real disposable income spiked 6.2 per cent in 2020, thanks to federal income replacement programs. These stimulus and benefit programs along with accelerating wage growth are continuing to boost disposable incomes this year, though that is expected to shrink to 3.3 per cent next year as government income replacements cease.

Consumption has exploded in 2021 with the improving pandemic situation and rising incomes, with a higher than normal savings rate owing to federal benefits.