
US: No Recession, but the best is behind. September’s nonfarm payroll (NFP) surprised to the upside at 119k (vs. 51k expected). However, the unemployment rate ticked up from August’s 4.3% to September’s 4.4%. Despite a higher labour force participation rate, job opportunities could not keep pace. The next official labour print, the November NFP, will be released six days after the 10 Dec FOMC meeting. In the absence of official NFP data, investors will likely lean on alternative indicators to gauge labour momentum. Weekly ADP employment has now contracted for two consecutive weeks. We see the following downside risks for the job market. First, government shutdowns could have dragged overall hiring. Notably, the government and quasi-public sectors like education and health care contributed to 90% of NFP gains over the past nine months. Second, retail, leisure, and hospitality employment could also be at risk. Against this backdrop, the Fed remains on track to deliver another 50 bps of cuts by end-2026.
Amid the debate over monetary policy easing, it is striking that many aspects of the US economy and financial markets look relatively healthy. While we recognise sporadic signs of weakness, we remain firmly in the no-recession camp. We forecast real GDP growth of c.1.5-2% this year and the next.
The US economy is leading the world in a historic spike in tech investments, primarily related to data centres and hardware for training and executing Large Language Models. With hundreds of billions spent this year and more in the pipeline for years to come, this secular investment boom is likely to be as important a growth contributor as consumption, traditionally the mainstay of the US economy. The electricity needs of the tech sector are surging, driving a spike in investment in power generation. From renewables to natural gas, small nuclear reactors to oil, the US accounts for 25% of global energy investment, and all signs point to further momentum in this sector in the near and medium term.
Various tax benefits for the household and corporate sectors stipulated in the recently passed One Big Beautiful Bill will be trickling through the US economy in the coming quarters. Additionally, tax refunds starting January 2026 could be as much as 20% higher for 70% of American households. This would likely be of substantial support for consumption and overall demand.
Federal government spending is up by nearly USD400bn so far this year, while tariff revenues have risen by USD116bn. Monthly tariff collections have stabilised at just under USD30bn. Assuming this collection rate continues, the US could collect over USD350bn annually in tariff revenues going forward, amounting to 1% of GDP. Unfortunately, even after this herculean and destabilising effort, the US fiscal position will remain challenging, with spending increases likely to outpace revenue growth. The biggest offset to tariff revenues will come from significant tax cuts in the pipeline, as part of the mega fiscal measures passed in 2025.
After proving stronger than feared earlier this year, the US is stepping into 2026 with little fear of recession but a broader set of concerns about cyclical strength and erosion of institutional integrity. The best times may well be behind us.
Figure 1: Change in US customs revenues and spending between 9M25 and 9M24 
Source: US Departments of Customs and Treasury, DBS
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