The U.S. economy, confirming a "recovery trend" after shaking off recession concerns... Divergent opinions on the prospect of interest rate cuts

Signs of the U.S. economy’s steady recovery continue to emerge. Last week’s release of key indicators such as non-farm employment, unemployment rate, and average hourly wages all exceeded market expectations, boosting hopes for an economic rebound.

Why Employment Indicators Cause Misunderstanding

Previously, the market generally based concerns on slowing employment data, fearing an imminent recession. However, experts point out that this interpretation is distorted by various structural factors such as changes in labor supply, corporate labor hoarding, reduced immigration inflows, and the normalization process after the COVID-19 pandemic.

In reality, these combined factors led economists to make incorrect recession predictions, while the U.S. economy has continued to show steady recovery.

The Key is ‘Average Hourly Wages’

Considered a more reliable economic thermometer, the indicator is average hourly wages. During a recession, companies tend to cut wages first.

However, average hourly wages have not recorded negative growth since 2021, maintaining a steady increase of about 0.3% per month. Looking at this indicator alone, it naturally leads to the conclusion that the U.S. economy is currently in a ‘recovery’ phase rather than a ‘recession.’

Good economic indicators are ‘Bearish’ for the market?

Ironically, after the release of these positive indicators, the market actually declined. Because a resilient economy reduces the urgency for the Federal Reserve to cut interest rates. This is the so-called ‘good news is bad news’ phenomenon.

In fact, market expectations for a full-year rate cut in 2026 sharply retreated after the indicators were announced.

“Kevin Woor will cut rates anyway”

However, some experts believe this market reaction is excessive. Considering Kevin Woor, viewed as a potential future Fed chair candidate, their political and economic tendencies suggest that regardless of the indicators, the likelihood of rate cuts remains high.

Economic Surprise Index Continues to Rise

On the other hand, the ‘Economic Surprise Index,’ which measures how much economic indicators surpass market expectations, is currently on an upward trend. As long as this index continues to rise, it can be seen as evidence that the economy’s acceleration trend persists.

Experts emphasize: “As long as this index continues to rise, the likelihood of a recession becoming a reality is very low.”