The Biden\u2002administration is facing a complex set of economic conditions in 2023.
\nAs Friday\u2019s surprisingly strong jobs report showed, employment levels are at a 50-year high even as inflation has been falling for six months in a row.
\nConsistently strong employment along with solid overall growth in the economy during 2022 are also assuaging fears of a recession. Even so, a chorus of voices in the private sector that predicted a recession in 2022 still see one as inevitable in 2023.
\nHere\u2019s a look at the economic obstacle course in front of the president ahead of his 2023 State of the Union address.
\nThe full blow of Fed rate hikes
\nGiven the strength of last week\u2019s jobs report, there\u2019s uncertainty now about whether the Federal Reserve will keep raising rates after its March meeting. But even if last week\u2019s hike were to be the last, the bludgeon of higher interest rates takes time to descend upon the economy.
\nAs the Fed noted after its latest hike Wednesday, the central bank is accounting for \u201cthe lags with which monetary policy affects economic activity and inflation.\u201d
\nThat means consumers and businesses may not be feeling all of the pressure from the Fed\u2019s aggressive streak of four 75-basis-point hikes last year.
\n\u201cAfter a solid year in 2022, we expect the consumer to feel the weight of 2023,\u201d David Tinsley, an analyst with the Bank of America Institute, said in a January statement.
\nConsumer spending started declining at the end of last year, falling 0.1 percent in November and picking up steam to fall 0.2 percent in December.
\nDespite the downturn in spending, Biden administration officials believe a strong labor market will help propel the economy through recession fears.
\n\u201cLook, you don\u2019t have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years,\u201d Treasury Secretary Janet Yellen\u2002said on ABC\u2019s \u201cGood Morning America\u201d on Monday. \u201cSo what I see is a path in which inflation is declining significantly and the economy is remaining strong.\u201d
\nThe debt ceiling threatens a US default
\nThe U.S. reached the federal debt limit in January, forcing the Treasury to begin \u201cextraordinary\u201d accounting measures to make sure the country can keep paying its bills. Congress needs to increase the federal government\u2019s borrowing limit by summer or else the government will to default on its debt, which would have huge consequences for the international economy.
\nRepublicans in the GOP-controlled House are saying they won\u2019t agree to raise the limit unless Democrats agree to spending cuts, but Republicans have yet to say exactly what those cuts should be.
\nThe administration\u2019s position is that it won\u2019t negotiate on the debt ceiling increase, that the cost of a default would be so damaging to the economy and U.S. credibility that it needs to be done automatically.
\nThe stakes are likely higher for the administration, which has to choose between agreeing to an unpopular set of austerity measures involving Social Security and Medicare and overseeing the first federal default in U.S. history. For House Republicans, the choice is between maintaining a status quo on federal spending and being responsible for tanking the global economy.
\nInflation is coming down, but it\u2019s still high
\nInflation has fallen for six months straight even as the labor market has remained tight, but it\u2019s still at the highest level it\u2019s been in decades. Since last year, prices in the consumer price index are up 6.5 percent and prices in the personal consumption expenditures price index are up 5 percent.
\nThose higher prices are still causing pain throughout the economy.
\n\u201cWe have had to change our menu prices countless times just to make sure that we don\u2019t go out of business. We still are not charging enough for our menu items because we are afraid that we will price ourselves out of business,\u201d Ashley Bachman, a restaurant owner, testified to the House Ways and Means Committee at a field hearing it held in West Virginia on Monday.
\nThe Fed\u2019s target rate for annual inflation is 2 percent, but there\u2019s doubt among some economists that the Fed will be able to hit this benchmark without a massive recession.
\nWhile the trajectory of recent inflation is heading in an encouraging direction, it could prove resistant as it approaches its target. In that case, the Biden administration and Congress could consider additional inflation-fighting measures, including releases of petroleum from the strategic reserve.
\nLabor unrest is continuing
\n2022 was a big year for labor unrest with union organizing happening at a number of high-profile companies, including Starbucks and Amazon, as well as a wide variety of strikes and other labor actions occurring across the country.
\nA planned railroad strike last fall that was narrowly avoided after the Biden administration got involved in negotiations. The strike would have been the first of its kind in nearly a hundred years.
\nCornell University\u2019s Labor Action Tracker shows that increased labor activity in the U.S. could be continuing into 2023. There were 59,500 workers on strike in December, up from 57,200 the previous month.
\nOne notable strike that could be in the making this year involves shipping company UPS that\u2019s currently in negotiations with the Teamsters union.
\n\u201c[The union] is going to pick a fight with this company, and that fight is to get the very best contract we can get for our members,\u201d Teamsters General Secretary-Treasurer Fred Zuckerman said at a meeting in January.
\nGlobal shock factors
\nPandemic-related supply shocks, the war in Ukraine and other global headwinds posed serious challenges for the U.S. economy in 2022, fueling high inflation and disrupting global trade.
\nThese risks are still very much at play. The Russian invasion of Ukraine, which many military analysts had predicted would be completed quickly, is now coming up on its first anniversary. Supply shocks to the volatile petroleum market, which account for a major portion of headline inflation, are still a risk.
\nThe Biden administration will also have to respond to developments in China\u2019s COVID-19 containment policy, which loosened last year from a zero-tolerance stance and increased infection rates. A surge of economic activity in China could give the U.S. economy more fuel for exports and services, but more debilitating outbreaks could lead to supply snarls and higher inflation.<\/p>\n
Thehill<\/p>\n
Tags\uff1aBiden, economic hurdles<\/p>\n","protected":false},"excerpt":{"rendered":"
The Biden\u2002administration is facing a complex set of economic conditions in 2023. As Friday\u2019s surprisingly strong jobs report showed, employment levels are at a 50-year high even as inflation has been falling for six months in a row. Consistently strong employment along with solid overall growth in the economy during 2022 are also assuaging fears of […]<\/p>\n","protected":false},"author":5,"featured_media":5446,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1155],"tags":[1169,1964,2063],"class_list":["post-5445","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-biden","tag-economic","tag-facing"],"_links":{"self":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/5445","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5445"}],"version-history":[{"count":1,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/5445\/revisions"}],"predecessor-version":[{"id":5447,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/5445\/revisions\/5447"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/media\/5446"}],"wp:attachment":[{"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}