Factors Blurring The Likelihood Of A Recession

Published Friday, November 4, 2022 at: 7:25 PM EDT

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The pace of job creation is still strong, and the unemployment rate remains near its all-time low, despite aggressive Federal Reserve rate hikes to slow the economy and stop inflation. But the latest economic data offers a blurry picture of whether there will be a recession, how long it will last and how deep it will be.

The U.S. government responded to the Covid-19 pandemic with about $10 trillion in stimulus payments to individuals and businesses between March 2020 and April 2021. The massive stimulus prevented financial panic and an economic depression following the partial shutdown of the economy. It is now complicating the Fed’s job, making it harder to put the brakes on the economy.

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The economy created 261,000 new jobs in October, according to this morning’s report from the Bureau of Labor Statistics, and the unemployment rate rose from 3.5% in September to 3.7%.

The pace of job creation is still strong, and the unemployment rate remains near its all-time low, despite aggressive Federal Reserve rate hikes to slow the economy and stop inflation. The Fed’s goal of stopping high-inflation before it becomes ingrained in the American consumer’s psyche is being complicated by a strange brew of rare factors – the pandemic, massive stimulus from the government, supply chain disruptions, and then an unprovoked war by Russia in Ukraine that threatens Europe’s energy needs, as winter is coming.    

The nation’s central bankers who regulate lending rates met Wednesday. As expected, they raised rates for the sixth time in seven months, and it was the fourth consecutive 75-basis point hike. Hiking lending rates more aggressively than they have in generations is intended to stop inflation but the confluence of so many unusual factors makes the Fed’s job more difficult.      

The U.S. government responded to the Covid-19 pandemic with about $10 trillion in stimulus payments to individuals and businesses between March 2020 and April 2021. The massive stimulus prevented financial panic and an economic depression following the partial shutdown of the economy. It is now complicating the Fed’s job, making it harder to put the brakes on the economy.

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The S&P 500 stock index closed Friday at 3,770.55 gaining +1.36% from Thursday, and declining -3.35% from a week ago. The index is up +68.52% from the March 23, 2020, bear market low and -21.4% lower than its January 3rd all-time high. 

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This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

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