The regional bank strain appears to have stabilized (for now) but the partisan drama over paying the country’s bills holds huge risks. Two dark horses have emerged to challenge the “soft landing” narrative: a regional banking crisis set off by little-known Silicon Valley Bank and a manufactured debt ceiling crisis due to political wrangling. It’s possible that we have a mild recession,” he told reporters at a news conference following the central bank’s latest rate decision. “Avoiding a recession is, in my view, more likely than having a recession,” Powell said. (Photo by Liu Jie/Xinhua via Getty Images) Liu Jie/Xinhua/Getty Images The Fed raised interest rates by 25 basis points at the conclusion of its two-day meeting on Wednesday, lifting the target range of the federal funds rate to 4.75-5 percent. Federal Reserve Chair Jerome Powell Rear attends a press conference in Washington, D.C., the United States, on March 22, 2023. Goldman Sachs pegs recession odds at 35% and Fed Chair Jerome Powell last week said the economy could still skirt a recession. Meantime, the Fed appears to be near the end of its rate-hike cycle. Stock markets had a banner winter on hopes the economy was on its way to a possible “soft landing.” Economic growth and inflation have cooled, without a corresponding spike in joblessness.
The narrative seems to shift by the week, in what has been the longest recession watch in memory. (Key readings on consumer and producer prices come Wednesday and Thursday.) Those higher wages may complicate the Federal Reserve’s inflation fight, but they may also be underpinning consumer spending, helping the economy avoid a recession. Now that inflation appears to be going from a boil to a simmer, it means less of that pay bump is going to cover higher inflation. The government reported a record 7.9 million people employed in construction jobs in April.Īfter decades of weak wage growth, workers have enjoyed the best pay gains in a generation, especially workers at the lower end of the pay ladder. Despite Silicon Valley pink slips, there is still plenty of hiring happening in technology, especially in computer systems design and services. The economy has added an astonishing 1.2 million jobs this year and the jobless rate matches the lowest since 1969. The headlines blare layoffs - from Walmart, Disney, Amazon, 3M, General Motors and Meta - but, overall, hiring picked up speed in April. Economists have forecast for months that a recession is just around the corner.Īnd yet, the US economy today is growing, the job market is strong, and the consumer is still spending. Shutdowns and disease outbreaks disrupted global supply chains, leading to the highest inflation in 40 years and (eventually) to aggressive rate hikes from global central banks. The US economy is going from broken to bizarre.Ĭovid crashed the American economy three years ago with no playbook for the wild recovery that would follow.
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