U.S. economic growth decreased to a 2.9 percent annual rate in the fourth quarter, down from the third quarter’s rate of 3.2 percent, according to the Commerce Department, reports The Wall Street Journal. The dramatic post-pandemic growth was bogged down by high inflation and rising interest rates.
Economic output increased by one percent in the last quarter of 2022 compared to the year before. This is much less than the 5.7 percent growth in 2021 compared to the year before.
Economists continue to warn a recession may be on the horizon this year. The attempt to curb high inflation through interest-rate increases from the Federal Reserve may trigger spending cutbacks and job losses.
Job losses in 2022 were a point of contention throughout the economy. In the second quarter of last year, job gains were down 185,000 from the previous quarter while job losses increased by 1.6 million over the same period, according to data from the Bureau of Labor Statistics. Gross job losses represented 6.7 percent of private-sector employment over the second quarter.
In addition to the bleak job loss data, higher interest rates and persistent inflation weighed heavily of the economy, according to a survey of U.S. purchasing managers.
“Headwinds from the big jump in interest rates, consumers cutting back on discretionary spending, and weak economies overseas were big problems for the U.S. in late 2022,” Bill Adams, chief economist for Comerica Bank, told the newspaper. “I expect real GDP growth will likely turn negative in the first half of this year.”
Inflation is gradually declining from its record highs while wage growth stays strong.
“If we continue to get strong job growth and if we continue to get consumer spending on services, and companies don’t cut back on [capital expenditures], I think that adds fuel to the soft-landing story,” said Luke Tilley, chief economist at Wilmington Trust. The term “soft landing” refers to the Fed’s attempt to bring down inflation by slowing economic growth, rather than reversing it. Full Story (Subscription Required)
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