Five Facts on the state of the economy
One month into a new year, America’s economic outlook is mixed, with reasons both for hope and trepidation. Here are Five Facts about the changing state of the U.S. economy.
1. The U.S. economy grew at an annual rate of 2.9% in the fourth quarter of 2022.
While many economists remain concerned about a recession, it isn’t here yet. A recession occurs when a country’s economy shrinks for two consecutive quarters, but America’s gross domestic product (GDP), the total of all goods and services produced, grew nearly 3% at an annualized rate between October and December. Some aren’t convinced that trouble isn’t still on the horizon, however.
2. The annual inflation rate fell to 6.5%, the lowest rate since November 2021.
After months of soaring prices for gas, groceries, and other essentials, American families are getting some relief. In December, the inflation rate, which measures how much more expensive goods and services become over a 12-month period, fell to 6.5%, down from 7.1% in November. While that is the lowest inflation rate in more than a year, 2022 remained the worst year for inflation since 1981.
3. U.S. employers cut more than 100,000 jobs in January but...
Despite the overall growth for the economy, more than 100,000 American workers suddenly found themselves out of a job last month, making it the worst January for job losses since the Great Recession. Many of those layoffs occurred in the tech sector, as major companies like Microsoft and Meta announced they were letting go of thousands of workers. At the same time, there are still millions more unfilled jobs than there are unemployed workers, meaning that businesses are still eager to hire.
Despite this, U.S. employers added a surprising 517,000 jobs in January, an increase from 260,000 in December.
4. The Consumer Confidence Index was 107 last month, the lowest level in a year.
The Consumer Confidence Index measures how consumers generally feel about the state of the U.S. economy. The higher the number, the more confident people feel about the jobs market, business conditions, and other aspects of the economy. Before COVID, consumer sentiment hovered close to 140, while during the worst of the crisis it fell to the mid-80s. A score of 107 matches the lowest level registered in 2022, suggesting that consumers remain nervous about the prospects for the economy in the months ahead.
5. Interest rates are higher than at any time since 2007.
During COVID, the Federal Reserve dropped interest rates to close to 0% in order to encourage people to borrow and spend money to keep the economy afloat. Since March of last year, the Fed has reversed course by raising interest rates to combat the surging inflation caused by an overactive economy and strained supply chains. Higher interest rates can slow the economy, but they make life tougher for average Americans by making buying a car or house, or maintaining a credit card, more expensive. This week, Fed Chair Jerome Powell announced a 0.25% rate hike, putting interest rates at 4.5%, and said that more rate hikes were likely to occur down the road.