The “yes, but” economy. Yes, we are worried about a recession – but the economy remains resilient


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Each week brings head-scratching, conflicting news about the economy. This past week has been no different, with a slew of economic reports showing that the US economy is showing remarkable resilience – despite the recession talk.

Yes, the economy is strong. But it comes with many caveats.

Let’s check:

However, these are just ingredients in a murky soup of conflicting “yes, but” headlines.

Yes, consumers say they feel bad about the economy. But a record 196 million Americans went shopping over Thanksgiving weekend — and those huge sales weren’t just because inflation pushed prices up, but because people were making more transactions, according to Adobe Analytics.

Curtis Dubay, chief economist at the US Chamber of Commerce, calls this “second-hand pessimism” and says the economy may not be doing as badly as you think.

Yes, inflation at near 40-year highs is biting family budgets. But Americans are booking air travel and heading to Disney parks in near-record numbers, even with higher park prices.

Yes, economists are concerned about a recession, but the job market is incredibly tight with more than 10 million open positions and 1.7 positions for anyone looking for one (or looking for a job).

“The job market is incredibly strong again,” US Federal Reserve Chairman Jerome Powell said in a speech on Wednesday. “In a way, it’s too big because it’s going to add to inflation.”

What’s next?

The truth is that no one knows what will happen next. Forecasts have been notoriously unreliable in the post-Covid economy. (Remember the “temporary” inflation?)

The Fed has attempted to stem the highest rate of inflation since the 1980s by raising interest rates six times this year and even raising interest rates by three-quarters of a point not once but four times in a row.

That means the next year will no doubt be challenging as all of this tightening continues to make its way through the economy.

But household finances are in better shape to cope, with $1.7 trillion in excess savings as a buffer — though people will likely need to draw on more of their savings.

And even though the housing market is cooling, it’s not collapsing. After a very strong 2021, “the sector is readjusting, recalibrating,” Brown Harris Stevens CEO Bess Freedman said on CNN’s “Early Start.”

Covid has wrecked the economy and it has been difficult to measure to put back together. Tens of millions of jobs were lost overnight. Schools closed, factories closed, more than a million lives lost. More than two years later, we are still struggling to assess the strength and durability of the recovery.

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