In a surprising twist, the US economy persists in defying recession predictions, despite the Federal Reserve’s steady rate hike. In the last twelve months, the anticipated recession has eluded its arrival. What reasons are behind this economic resistance?
The figures reveal an economy that is not submitting to the expected weakness. Labor demand remains strong and consumers remain enthusiastic about spending as the stock market recovers and housing stabilizes. The Fed’s measures to cool the economy have not yet had the expected effect. It could be because of the lasting influence of the pandemic, which has left consumers and businesses in a scramble to catch up. Accumulated savings and government financial assistance during the lockdown give consumers room to spend freely and businesses to continue to grow. In addition, inflation also boosts wages, increasing spending.
A critical component of this tenacity lies in fixed-rate consumer debt. Although the Fed has raised its rates, much of the financial burden on families is subject to fixed rates established in previous years. This has allowed households to maintain their level of spending and sustain the strength of the economy, thus counteracting the predictions of recession. The increase in job creation is accompanied by salary increases, generating greater liquidity.
The US economic scene appears to have taken a reluctant stance to decline predictions, with a fierce combination of forces defying projected trends. The economy continues its battle against the recession, ready to show that a soft landing is possible.
