Latest News On American Economy – The US economy did better than expected at the end of last year, despite rising borrowing costs and rising costs of living weighing on growth.
According to official statistics, the economy grew at an annual rate of 2.9% in the last three months of 2022.
Latest News On American Economy
Some analysts worry the US economy is headed for recession, but the job market is holding up.
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Rate-sensitive residential investment fell by nearly 27% annually in the three months to December due to a drop in new home construction, according to Thursday’s report.
For the full year, the economy he grew 2.1%. That was down from last year, when the economy rebounded after the pandemic and expanded by 5.9%, the fastest since 1984.
The surge fueled a sharp rise in prices, forcing the central bank to intervene to stabilize costs.
Last year, the Federal Reserve raised interest rates from near zero to he above 4%. This is her highest interest rate in 15 years.
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By raising borrowing costs, banks will encourage consumers to save more and spend less, hoping this will ease the pressure on prices. people are at risk of losing their jobs.
Reports of layoffs are on the rise. Manufacturer 3M, chemical company Dow, and technology companies IBM and SAP are among the major companies to announce major job cuts this week. But restaurant chains like Chipotle are hiring more staff.
US Federal Reserve (Fed) officials continue to hope the economy can adjust without massive job losses, saying they could end the rate hike campaign with a so-called “soft landing.”
“For almost a year, the Federal Reserve has tried to achieve a soft landing by raising short-term interest rates just enough to keep inflation down without triggering a recession, even in the face of the Fed’s efforts. , it is clear that the economy remains relatively strong, suggesting they are thriving,” said Richard Flynn, managing director of Charles Schwab UK.
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“But investors may fear that today’s numbers are somewhat deceiving, just as other recent data points to a recession.” We spoke to some economists to understand what is happening to the economy. We went back to the same experts to see how things played out and what they had their eyes on in the future.
At the time, they thought the country would fare better than it did in the face of widespread economic uncertainty during the 2008 recession.
But they also had some concerns about how much the government would intervene and how effective the national vaccine program would be.
In one month, 17 million Americans lost their jobs and Gross Domestic Product (GDP), the way economists measure the total value of a country’s goods and services, fell by $2.15 trillion (£1.55 trillion). bottom.
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And just like during the financial crisis, the U.S. government needed to act quickly to avoid further damage, says Todd Knoop, an economist who studies the history of recessions at Cornell University.
When I spoke with Knoop last June, he hoped government spending and monetary policy would prevent a complete collapse of the economy.
Mr. Knoop’s predictions were spot on. Congress has passed a series of aid packages worth trillions of dollars. He believes that assistance, such as direct payments to Americans and extended unemployment benefits, has helped keep many unemployed people alive.
“By almost every factor, things are better than the worst-case scenario, which is great,” says Knoop.
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About 15 million Americans have returned to work, although unemployment remains higher than before the pandemic. This is also good news.
Last June, he likened the pandemic to a hurricane that indiscriminately destroyed businesses and homes. Pandemic spending is similar to disaster relief, he argued.
But even with government aid, many small businesses are going bankrupt or struggling, which will affect the economy as a whole, he said.
“They don’t make the headlines. You may not have heard of them. They may look like a two-man operation, but that’s a certain amount of damage,” he says.
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Knoop said during the first wave of lockdowns and stay-at-home orders last spring, it was clear that direct-customer dependent industries, such as travel and some retail, would struggle, but other industries had an easier time. said it would adapt to “New Normal”.
“This is really destroying people and destroying human systems. It’s the way we share ideas and technology and interact with each other,” he said at the time.
Amazon tripled its profits during the pandemic, boosting founder Jeff Bezos’ personal fortune to $202 billion, according to the Bloomberg Billionaires Index.
Comparing his 2019 sales to his 2020 sales, the industry lost $115 billion in sales and the airline industry has received about $55 billion in bailouts from the federal government, according to the National Restaurant Association. .
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When the Dow Jones fell nearly 3,000 points in his single day on March 16, 2020, many panicked.
“There was a light at the end of the tunnel, and that light was driven by the vaccine,” he says.
The stock market continues to reach record highs since its March record low. The Dow his Jones nearly doubled in his year, reaching an all-time high of his 34,200.67 points on April 16. had received at least one dose.
The boom is even bigger than Harvey expected, but he remains cautious about what it means for the long-term economic recovery.
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“Essentially, the stock market has come to the view that the pandemic never happened.
Harvey said a dizzying market rebound combined with low interest rates has led many to make decisions with “rose-tinted glasses.” From buying your dream home in the country to taking out a large loan for your business. If the economy hits a rocky shore again, there could be more financial problems down the road.
Another recession could be triggered if a new strain proves to be resistant to the vaccine, or if there were problems with vaccine delivery.
Harvey is critical of the way Western countries are hoarding vaccines, noting that the longer other countries wait for a vaccine, the longer it takes for the virus to mutate.
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“It’s a global thing, and the longer we wait for vaccination, the more likely these variants are to become much more contagious and fatal.”
Both Harvey and Knoop believe the economy recovered strongly last year, but they also worry about the future.
“Some of these risks are greater today than they were a year ago, so we have to be cautious about our course forward,” he says.
One of Harvey’s biggest concerns is the risk of unexpected inflation over the next few years, not necessarily in the short term.
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If the government borrows money to inject additional spending into the economy, both interest rates and the prices of ordinary commodities can rise, as the government did.
“People believe that you can just use it and there will be no results.
For Knoop, his long-term concern is how uneven the country’s economic recovery has been. Some have succeeded, he says, while others have struggled along long-established fault lines of inequality, such as race and gender.
“A year ago we expected inequality to get worse, but we may not have understood some of the inequality in how well those at the top have done during the pandemic,” he says.
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“I never thought the stock market would be this high and the real estate boom would be so high. Those who were wealthy before COVID-19 are actually doing very well.”
On the other hand, many low-wage workers in the service industry have had to ensure their health and safety to go to work if their jobs have been lost, their working hours have been reduced, or they are essential workers. I did.
This rising inequality is bad news for the economy, as it affects many aspects of our society, including health, wealth, education and crime, Knoop said.
“Inequality is bad for economic growth. Bad for economic growth today. Bad for education outcomes which means worse economic growth in the future,” he says. posted on his website.
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The US Federal Reserve has been raising interest rates to restore price stability and bring the labor market into balance. In the United States, the demand for new jobs has outstripped the supply of available labor as the unemployment rate has fallen to its lowest level in more than 50 years, which has contributed to rising inflation. Analysis shows that in order to restore balance to the economy, it is necessary to maintain course and
