Economic Outlook: Recession watch: U.S. economy is on shaky ground

by | Jan 30, 2023 | Stock Market

Has the U.S. economy already toppled into a recession? Probably not, but it’s headed toward the danger zone. The economy entered the new year with fading momentum. Rising interest rates orchestrated by the Federal Reserve to tackle high inflation have delivered a big hit to growth.

Start with consumer spending, the main engine of the economy. It fell in the final two months of 2022. Businesses aren’t about to come to the rescue, either. Construction companies were the first to pull back last year after rising mortgage rates choked off home sales. More recently, manufacturers have retreated in response to slower sales. Industrial production declined in both November and December and executives have signaled they will proceed with caution early in the new year. The government is also not going to lend a helping hand like it did during the first few years of the pandemic. Republicans who’ve taken control of the House are unlikely to support major fiscal stimulus if the economy falters. They blame a huge increase in government spending early in the Biden administration for contributing to high inflation — a point even some prominent Democratic economists don’t dispute. All of that put together suggests to some economists that a downturn might be underway or is all but certain to take place quite soon. “The economy was on the precipice of a recession, and may already have fallen off the ledge,” said Paul Ashworth, chief North American economist at Capital Economics. The news is not all dire, however. Take the labor market. The number of new filings for unemployment benefits fell to a four-month low of 190,000 in mid-January, keeping it near the lowest level since the 1960s. The unemployment rate also slid to 3.5% in December to match the lowest level in more than 50 years. Simply pu …

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