Why the U.S. Remains Far From Recession

Employers are hiring aggressively, consumers are spending freely, the stock market is rebounding and the housing market appears to be stabilizing—the most recent evidence that the Fed’s efforts have yet to significantly weaken the economy.

Instead, the lingering effects of the pandemic have left consumers and employers still playing catch-up. That momentum could prove self-sustaining.

Americans are splurging on the activities they skipped during pandemic lockdowns, such as travel, concerts and dining out. Businesses are staffing up to satisfy the pent-up demand. Government policies in response to the pandemic—low interest rates and trillions of dollars in financial assistance—left consumers and businesses with lots of money and cheap debt. The same inflation that so worries the Fed translates into higher wages and profits, fueling spending.

Many economists expect the Fed’s rate increases to cool the economy and price pressures over time, triggering a recession later this year. So far, however, the data keep coming in hotter than forecast.

Job gains, in particular, remain robust, pumping more money into Americans’ wallets. Payrolls grew by a surprisingly large 339,000 in May, and the increases for the preceding two months were higher than initially estimated, the Labor Department said Friday.

Approved ~ FS