The US economy doesn’t seem to be able to decide whether it’s going under or not.
Lately there have been ominous signs, as tens of thousands are being laid off from major tech companies and on Wall Street.
But the latest GDP report, the next economic indicator, shows that the economy grew by 2.9 percent in the fourth quarter.
“My interpretation of the latest figures is that the economy is slowing down but not too much,” said Raymond Hill, senior economics professor at the Goizueta Business School of Emory University in Atlanta, to China Daily. “The gradual decrease is clearly visible from the detailed analysis in the GDP figures: 1.5 percent of the 2.9 percent of GDP growth was more than in the books. This is not a sign of health: goods are produced but not purchased.
“Furthermore, both housing and commercial spending fell. Recessions are often the most important factors that cause an economy to collapse or collapse,” he said.
“At the same time, the labor market is still difficult. Yes, many headlines of layoffs are large companies, but the history of unemployment, and the unemployment rate for the last week is slightly lower (not higher), “said Hill. “And, even minus those contributions, the economy grew in the fourth quarter.
“Right now, it looks to me like the Fed is on track to avoid a hard landing,” he said.
In 2022, the Federal Reserve raised its rate by 425 basis points from near zero to 4.25-4.50 percent, the highest rate since late 2007.
On Wednesday, the Fed went with a 25-basis-point hike, as expected, to push its interest rate to 4.50-4.75 percent.
Fed Chairman Jerome Powell said Wednesday after a meeting of the Federal Open Market Committee that, “We will need more evidence to be confident that inflation has come down significantly.”
While Powell said more hikes were coming, he also said that “the process of reducing spending has begun”.
The increase of 25-bass-points was limited compared to the rise of 50-points in December, which was led by four additions of 75.
“We’re probably going to have high interest rates for quite some time. You would think that eventually that would reduce consumption, although we haven’t done anything about it,” Harvard University economist Kenneth Rogoff told the Wall Street Journal.
US consumer spending fell for a second straight month in December, and a report from the Commerce Department on Friday showed the smallest gain in personal income in eight months.
“Boosted by higher prices and borrowing, as well as a sense of affluence, US households are shrinking and contributed to the decline in GDP in the first quarter,” said Sal Guatieri, chief economist at BMO Capital Markets. “The good news is that they are also pushing back on rate hikes, which will help the Fed tackle inflation and reduce inflation.”
Higher borrowing costs have reduced the demand for property, which is often bought with credit. Credit card payments rose 15 percent in the third quarter, according to the Federal Reserve Bank of New York, the largest increase in more than two decades.
Consumer spending accounts for about 70 percent of the economy, which is why The Wall Street Journal said its economic and financial research put the probability of a decline in the next 12 months at 61 percent.
But there is hope that the biggest cost-of-living changes since 1981 for more than 65 million Social Security beneficiaries, which went into effect in January, will reduce the cost of spending for consumers.
Although the unemployment rate is close to a decade, major technology companies including Amazon, IBM, Google, Meta, Microsoft, Twitter have laid off thousands.
On Wall Street, Goldman Sachs, Morgan Stanley, Credit Suisse and Bank of New York Mellon cut more than 15,000 jobs in the past few months, the Financial Times reported.
“The last area of strength is the labor market, but I don’t think it can compete with all these other forces,” Kathy Bostjancic, Nationwide’s chief financial officer, told the Journal.
The US economy added 223,000 jobs in December, the smallest gain in two years.
But unemployment was only 3.5 percent in December, and hourly wages rose 4.6 percent. There were about 10.5 million open jobs in November, according to the Labor Department, the Journal reported.
Also, the increase in unemployment benefits and the payment of government support to families during the height of the COVID-19 epidemic, led to more savings.
Since then, interest rates have dropped to about 3 percent of monthly income, down from 30 percent at the start of the pandemic shutdown, the Journal reported.
“We estimate that households still have nine months of energy use left if they continue to spend more than the previous six months,” said Tim Quinlan, chief economist at Wells Fargo.
Americans have also been struggling with the rising cost of everyday goods.
Jazzlyn Millberry, 33, a health insurance analyst in Pickerington, Ohio, told the Journal that last fall her bank statement showed that a month’s grocery bill for her family of four had risen to $900, from about $600 or $700.
“I find myself now going to three or four grocery stores just to get the best deals,” he said.
On the economic front, volumes entering the ports of Los Angeles and Long Beach in California were down more than 20 percent in December from last year.
“Through last July, we saw two years of unprecedented — seasonally high monthly volumes,” Port of Los Angeles CEO Gene Seroka said in his Jan. 19 State of the Port statement. “We started 2022 at the same speed, we have 109 ships in our queue, many of them are waiting outside the broken water for days to find a berth.”
By the end of 2022, there was a “disappointing 20 percent decline that started last August,” he said.
Seroka said the slowdown was due to negotiations that had just ended, an early shipping season, the shift of cargo to the East and Gulf coasts, and lower imports from the rest of the country.
However, he said 2022 was the “silver medal year” for the port, which will record the second highest management in its 115-year history.
Organizations contributed to this issue.
