Each week brings controversial financial issues. This past week was no different, with several economic reports showing that – despite talk of a recession – the US economy is showing resilience.
Yes, the economy is strong. But it comes with many caveats.
Let’s look again:
However, these are just ingredients in a dark soup of conflicting “yes, but” topics.
Yes, consumers say they feel sorry for the economy. But 196 million Americans went shopping over the Thanksgiving weekend — and those sales numbers grew not only because inflation drove up prices, but because people were making more, according to Adobe Analytics.
Curtis Dubay, an economist at the US Chamber of Commerce calls this “pessimistic” and says the economy may not be doing as well as you think.
Yes, nearly 40 years of inflation is eating into family budgets. But Americans are booking flights and going to Disney parks instead of reservations, even at higher park prices.
Yes, economists are worried about the recession, but the job market is very difficult with more than 10 million open jobs and 1.7 jobs available for everyone looking for one (or looking for a job).
“The labor market is very strong again,” Federal Reserve Chairman Jerome Powell said in a speech on Wednesday. “It’s very good, in a way, because it increases inflation.”
So what’s next?
The truth is that no one knows what will happen next. Forecasts have proven to be unreliable in the post-Covid economy. (Remember “transitory” inflation?”)
The Fed has been on pace for its highest rate hike since the 1980s, raising interest rates six times this year and even raising its highest quarterly rate not once but four times in a row.
This means that the next year will not be difficult because all the strengthening continues to extend to the economy.
But the household budget is good enough to handle it, with $1.7 trillion in reserves – even though people need to keep more of their savings.
And while the housing market may be cold, it’s not doomed. After a very strong 2021, the sector is “resetting, resetting,” Bess Freedman, CEO of Brown Harris Stevens, said on CNN’s “Early Start.”
Covid has disrupted the economy and recovering it has been 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.