By Robert Clampett
In a surprisingly strong showing, the U.S. economy grew at a 2.6% annual rate from July through September, snapping the previous two straight quarters of contraction, quieting some doomsayers bemoaning the economy’s health.
Overcoming growing inflationary signs and corresponding high interest rates, the nation’s gross domestic product (GDP) grew in the third quarter, following annual declines of 1.6% from January through March and 0.6% from April through June.
Buoyed by strengthening exports, increased consumer spending and a healthy job market with low unemployment figures, along with increased governmental spending, the nation’s economy turned around in dramatic fashion, according to the U.S. Commerce Department.
Yet, some economists fear that the worst is yet to come as the Federal Reserve has raised interest rates five times this year alone, with Fed Chairman Jerome Powell warning that the hikes could bring “pain” in higher unemployment and a potential recession.
However, others point to the fact that the economy still carries pockets of rebounding, particularly with the strengthened job reports, with unemployment rates at a half-century low of 3.5%.
In a Washington Post syndicated column, economic journalist Catherine Rampell assesses the quagmire that is the global economic future.
“Virtually no one seems ready for the dark clouds gathering over the domestic and global economies,” she opined. “Not most Americans, and certainly not the politicians who govern them.”
Her warning mirrored that of economic and business leaders have been sounding alarms recently about the rising risk of recession, noting that “economists surveyed by the Wall Street Journal believe there’s a roughly two-thirds chance of a recession in the United States in the next year.”
Pointing to a recent gauge of CEOs financial confidence by the Conference Board, its lowest level since 2009 (during the Great Recession), and 98 percent of surveyed CEOs anticipate a U.S. recession next year.
On the other hand, she says, other metrics — such as U.S. job growth — suggest the economy is still okay.
In a sharp rebound from the first half of the year, the U.S. economy has grown robustly. The most recent quarterly gross domestic report (GDP) show improvement over the previous two calculations between July and September—matching numbers of strong pre-Covid years of economic growth.
Despite this recent upturn, home sales and mortgage demand are plummeting; investors are dumping junk-rated securities sold by housing-finance giants Fannie Mae and Freddie Mac over concerns about rising mortgage defaults.
The biggest worry is how little governments have done to gird for a downturn.
Politicians in both parties have been scapegoating each other for possibly precipitating a recession, while doing little themselves to combat recession risks. In some cases, they have undertaken measures that worsen the economic outlook.
While a future of economic tightening seems assured, with a likely recession of some sort anticipated in mid-to-late 2023, there is little consensus to be found, depending on whom you ask.