United States-111101062

1Michael Feroli (1-212) 834-5523michael.e.feroli@jpmorgan.comJPMorgan Chase Bank NAMichael S Hanson (1-212) 622-8603michael.s.hanson@jpmchase.comJPMorgan Chase Bank NAMurat Tasci (1-212) 622-0288murat.tasci@jpmchase.comJ.P. Morgan Securities LLCAbiel Reinhart (1-212) 270 4058abiel.reinhart@jpmchase.comJPMorgan Chase Bank NANorth America Economic Research25 October 2024J P M O R G A Nmonths of good data before that possibility gets onto the Fed’s radar. Next week we also look for wage growth to cool modestly further with ECI growth of 0.9% in 3Q and a nearly three-year low of 4.0% annually. Meanwhile, as noted in this week’s Focus, after a sizable decline from their 2022 peak, job openings have been moving in a narrower range since this spring. We look for job openings to largely trend sideways around 8 million in next week’s September data. Yet another shade of beigeThe tension for the Fed—and to some extent our own fore-cast—is that continued surprising solid demand, as exempli-fied in robust GDP growth, contrasts with a relatively down-beat Beige Book, soft consumer sentiment, and weak manufacturing surveys (including this week’s October flash PMI ). Recall that Chair Powell leaned on the weakness in the August Beige Book to help justify the 50bp move in Septem-ber, and the latest report suggests economic activity remained largely unchanged across nearly all districts, with two report-ing modest growth. While we don’t think this will make the case for another 50bp cut in November, it likely reinforces the Fed’s cautious approach. That said, the outlook for consumer spending was mixed with some shifts toward cheaper alterna-tives noted, while the labor market discussion did not point to further deterioration. Rather, employment increased slightly with hiring mostly focused on replacements. Layoffs remain limited and worker turnover was low.Gross Domestic PopWe expect real GDP increased a robust 3.2%q/q saar last quarter, with the economy showing little sign of slowing through the middle part the year despite earlier concerns about the job market and weakness in the manufacturing sec-tor. Moreover, while the pace of growth is only marginally faster than in 2Q, final sales should increase a bit over 3% versus an average around 2% in the first half of the year. Much of that improvement is coming via stronger exports, though domestic consumption and equipment investment also remains robust. The laggard will be structures investment, which continues to feel the drag of elevated interest rates.The strength in domestic equipment investment (forecast 8%q/q) stands in contrast to a decline in core (nondefense ex aircraft) capital goods shipments (Figure 2). With this week’s September data, the latter fell 3% on the quarter in nominal terms. But the excluded transportation equipment, especially aircraft, are on track to a positive contribution this quarter. Net trade also should contribute: through August, an estimate of domestic consumption that adds imp