At the end of 2021, the US economy performed better than expected, despite the fact that higher borrowing costs and rising living costs slowed growth. According to official statistics, the economy expanded at a rate of 2.9% annually over the last three months of 2022. That was a decrease from the previous quarter’s 3.2% due to falling home sales and construction.
Despite the robust job market, some analysts are concerned that the US economy is headed for recession. While other aspects of the economy have been deteriorating, the unemployment rate is hovering around historic lows. Retail sales decreased by 1.1% from the previous month in December, which is typically a busy month for consumer spending.
In addition, manufacturing has suffered, and the stock market experienced a sharp decline last year. According to the report released on Thursday, a decrease in new home construction and a decline in housing investment, both of which are affected by interest rates, resulted in a decline of nearly 27% annually in the three months leading up to December.
However, consumer spending, the primary engine of the US economy, remained steady despite a slowdown. The economy expanded by 2.1% over the course of the year. That was down from last year, when the economy expanded at the fastest rate since 1984, roaring back to life after the pandemic.
The US central bank intervened to try to stabilize costs as a result of that surge, which contributed to a rapid rise in prices. The Federal Reserve increased interest rates for the first time in 15 years, going from close to zero to more than 4% last year.
In the hope that this will lessen the pressures driving up prices, the bank is raising borrowing costs to encourage consumers to save more and spend less. However, it runs the risk of causing a significant slowdown, which could put millions of people out of work.
There have been more reports of job cuts. This week, big companies like Dow Chemicals, IBM, and SAP in the technology sector, as well as manufacturing company 3M, made major layoff announcements. However, other establishments, such as Chipotle, are expanding their workforce.