Americans are feeling the effects of soaring prices. The cure isn't going to be good. President Joe Biden is expected to preside over a recession to stamp out inflation.
According to the latest estimates, a downturn by the start of 2024 is close to a three-in-four chance.
It seemed like a long shot that a US recession would happen in the near future. It looks like it's going to be difficult to avoid.
This is a source of economics.
The Fed raised its interest rate on Wednesday for the first time in almost three decades. The economy is often tipped into reverse when central bankers try to slow it down.
The stock market and bonds plunged when investors bet on a bad outcome. Americans watching their retirement funds dwindle as their grocery and utility bills soar say they feel gloomier about the economy than at any time in the last four decades.
At a time when US consumers are still flush with cash and the unemployment rate is close to historic lows, this is happening. Powell said there was no sign of a broader downturn. The administration highlighted projections from the Fed and others that suggest a recession is unlikely.
Biden is at risk of joining an unfamiliar club because of the sour mood. The effects of a recession have killed the re-election hopes of all but one US president in the past 50 years.
That prospect is causing turmoil in the Biden camp, ahead of crucial elections in November when his Democrats must defend thin majorities in Congress, or risk losing what ability they have to get legislation passed.
Democratic pollsters are getting feedback from voters who think economic storms are on the way. One person familiar with White House deliberations said that student loans were paralyzed by inflation fears. A windfall tax on oil profits is one of the ways the administration is trying to show they are fighting for hard-pressed households.
Illustrating what an uphill task that is right now, two key indicators came out last week that were close to disastrous for the White House.
Inflation unexpectedly spiked higher, triggering another leg of the stock-market plunge, and pushing the Fed into an even morehawkish stance. Sentiment among US consumers plummeted to the lowest level in records going back to 1978, a period that included three of the worst downturns in American history.
The ratings of the administration are already on the slide.
The Bureau of Labor Statistics is part of the University of Michigan.
This year is expected to be about rising prices. Inflation has reached levels that most Americans haven't seen in their lifetimes as a result of the supply-chain crunch and massive fiscalStimulus.
The Misery index is a measure of inflation and unemployment. The gauge is now higher than it was during several post- World War II recessions.
Americans will be pretty miserable on election day, according to projections by the economics company. A one-in-four chance that the economy won't be in a recession by that time will make many voters feel that way.
The misery index is a gauge of household wellbeing.
Source: Bloomberg Economics
Celinda Lake, one of Biden's top pollsters during the 2020 election, said her focus groups were filled with talk of the rising cost of gas and housing. Concerns about the value of the retirement funds have been raised recently.
Lake, president of Lake Research Partners, asked how the economy would be described. People have been talking about storms.
The S&P 500 stock index is down about 20% from its January peak and the average mortgage rate has almost doubled.
The market moves are influenced by the Fed. They show how the central bank's new policy is already having a negative effect on Americans' wealth and pocketbooks.
Mortgage rates have gone up.
There is a source for this.
The US economy is likely to avoid a recession according to officials at the Biden White House. They say that high inflation is caused by the war and the Pandemic.
One person familiar with the discussions said that concerns about inflation are impinging on policy discussions over questions like whether to forgive student loans or remove tariffs on China. Biden aides don't want to give the Republicans a talking point about the economy or contribute to inflation.
The Fed is in charge of fighting inflation, according to two of the administration's top economists. The Biden camp is also looking at other ways to cool prices.
A key Biden ally in the Senate wants to impose a federal tax on oil industry profits. According to people familiar with the matter, the White House has been asking big retailers to commit to cutting their prices if the president lowers some China tariffs.
Businesses cited a lack of understanding of what is driving inflation as the reason for the failed effort so far. Most economists don't buy the idea that inflation is caused by corporate greed.
A rebound from the Covid slump that has been impressive by the standards of recent US history is the main talking point of the administration.
Heather Boushey is a member of the Council of Economic Advisers.
We needed to pull everything out fast to get out of the recession. We need to increase our marathon pace. We can't keep going fast. The economy isn't that way.
According to a majority of Americans, the US is in a recession.
The Republicans say that Biden and his team are to blame for the high prices because they pumped more money into the economy in March 2021.
David Winston, a GOP pollster and strategist who helps craft economic messaging for Republican leadership in Congress, says that they put money into everyone's pockets but didn't do anything about supply chain issues. You get inflation when you don't know how to increase supply at the same time.
Biden hasn't come up with a concrete proposal for fixing inflation, so the GOP needs to come up with their own. The challenge for everyone is not just to tell people how bad it is, but what you will do about it.
White House officials acknowledge that a series of shocks including omicron, new Chinese lockdowns and the war in Ukraine have hampered the supply-side recovery and given new incentive to inflation just when it was expected to diminish.
A senior White House official said that the administration's economists modeled extreme scenarios to be prepared in case of emergency.
A more positive story about the economy is being spun. A senior official said that high savings for households, fat profits for businesses, and low costs to service debt are not indicative of a downturn.
The Fed's aggressive tightening cycles end in recession.
This is a source of economics.
The Biden team is trying to convince voters that there are lots of US jobs. After more than 20 million Americans were thrown out of work in a matter of weeks when Covid hit, the unemployment rate is close to half a century low at 3.6%. Lower-paid Americans have been helped by the fact that there are almost two job openings for every unemployed worker.
The vast majority of people in this country have a job. It's important to find a good fit in the labor market.
Elections are a lot more than that. According to many analysts, Bill Clinton overstated the case when he used the slogan "It's the economy, stupid" in 1992.
There are a lot of hot-button issues that will affect how Americans vote.
Even if the economy falls into a downturn, there is still time for it to bounce back before the presidential vote.
Christopher Wlezien, a political economist at the University of Texas, says that if a recession is inevitable, it's best for Biden to be prepared. He says the sooner it arrives, the better. The president is going to feel the effects of a worsening 2023 in the years to come. The next recession will be worse.
The kind of high readings on the economic Misery Index have not always meant electoral doom. By November, the measure will be exactly where it was a decade ago, when Barack Obama was re-elected.
There is one important difference. Unemployment was the biggest cause of misery back then. Robert Shiller said that it was a worse mix for the government.
People think they will be able to find a job. Everyone is affected by the effects of inflation. They see inflation when they go to the store. He says that they want to blame someone.
Jenny Leonard, Justin Sink, Rich Miller, and Andrew Husby assisted.
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