Each week brings strikingly contradictory news about the economy. This past week was no different, with a series of economic reports showing that despite rumors of a recession, the US economy is showing remarkable resilience.
Yes, the economy is strong. But it comes with a number of caveats.
Let’s take a look at the overview:
However, these are just ingredients in a murky soup of conflicting “yes, but” titles.
Yes, consumers say they feel bad about the economy. But a record 196 million Americans shopped over the Thanksgiving weekend — and those booming sales numbers weren’t just because inflation pushed up prices, but also because people made more transactions, according to Adobe Analytics.
Curtis Dubay, chief economist at the US Chamber of Commerce, calls it “second-hand pessimism” and says the economy may not be doing as badly as you think.
Yes, inflation is eating into family budgets at a near 40-year high. But Americans are booking air travel and heading to Disney parks in near-record numbers, even with higher park prices.
Yes, economists are worried about the recession, but the job market is incredibly tight with over 10 million job openings and 1.7 jobs available for anyone looking (or looking for a job).
“The labor market is incredibly strong again,” Federal Reserve Chairman Jerome Powell said Wednesday. “It’s too big in a way because it’s going to increase inflation.”
So what’s next?
The truth is, no one knows what will happen next. Forecasts have been notoriously unreliable in the post-Covid economy. (Remember “transitional” inflation?)
The Fed is trying to contain the highest inflation since the 1980s, raising interest rates six times this year and even introducing a hefty three-quarter point increase not once but four times in a row.
That means next year will no doubt be challenging as all this tightening continues to work its way through the economy.
But household finances are in a better position to handle it, with an excess of $1.7 trillion in savings as a cushion – although people will likely have to dip into more of their savings.
And while the housing market may be cooling, it’s not collapsing. After a very strong 2021, the sector is “re-adjusting, re-calibrating,” Bess Freedman, CEO of Brown Harris Stevens, said on CNN’s “Early Start.”
Covid has broken the economy and is difficult to measure. Tens of millions of jobs were lost overnight. Schools closed, factories closed, over a million lives lost. More than two years later, we are still struggling to gauge the strength and durability of the recovery.