The economy, that is.
The U.S. economy is in a strange place right now. Job growth is slowing, but demand for workers is strong. Inflation is high (but not as high as last spring). Consumers are spending more in some areas, but cutting back in others. Job openings are high but falling, while layoffs are low and … well, it depends what indicator you watch.
This is one snapshot of where the economy stands, based on an analysis of how various indicators compare with their historical levels and whether they’ve been getting better or worse in recent months.
There is no universally accepted definition of a “good” number of jobs or rate of wage growth, which means the exact placement of the various measures is somewhat subjective. Still, the patterns are revealing: The indicators are concentrated in the lower right-hand quadrant, meaning most of the economy is doing well, but slowing down.
Even in the best of times, it can be hard to get a handle on what’s happening in an economy with 150 million workers and $20 trillion worth of annual output. And these are far from the best of times. The pandemic and its ripple effects are continuing to disrupt global supply chains and keeping millions of Americans out of work. The war in Ukraine has pushed up gas and food prices, and added a new source of uncertainty. The Federal Reserve is trying to beat back the fastest inflation in decades — and threatening to cause a recession in the process.
By one common definition, the United States is already in a recession, because gross domestic product has declined for two consecutive quarters. Most economists consider that definition too simplistic, and prefer to look at a broader array of indicators across a variety of categories. They also say that to understand how the economy is doing, it is important to consider both levels and rates of change. It matters, for example, not only whether unemployment is low or high, but also whether it is rising or falling.
It also helps to consider the latest data in historical context. The graphics below show how this economic moment compares with recessions of the past 40 years, using the end of the second quarter as a benchmark. In most cases, the latest numbers don’t look much like the recessions of the past, although many show signs of a slowdown.
This is all very weird and I don’t think anyone knows exactly which way things are going to go. The Fed is pushing the the country into recession with its interest rate hikes in order to tame inflation so if I had to guess, that’s probably where it’s headed. But so far, the economy is still going in every direction at once so who knows?
It turns out that when the world economy is turned upside down by a global crisis weird things happen and it takes a while for things to go back to normal. Who could have guessed?