Publisher's Note: This post appears here courtesy of the The Daily Wire. The author of this post is Ben Zeisloft.
The American economy is expected to grow at a paltry 0.3% annualized rate in the third quarter of 2022, according to data from the Federal Reserve Bank of Atlanta.
The regional bank's GDPNow tracker, which calculates a running estimate of real output growth, correctly predicted that the economy would contract in both the first and second quarters of this year. Indeed, data from the Bureau of Economic Analysis later confirmed that the United States met the rule-of-thumb definition of a recession - two consecutive quarters of negative growth - as the economy shrank at a 1.6% annualized rate in the first quarter and a 0.6% pace in the second quarter.
While landmark reports regarding employment, inflation, private inventories, manufacturing output, and the housing market have been published over the past two months, analysts in Atlanta have repeatedly downgraded their growth forecast for the third quarter.
Price levels increased 8.3% between August 2021 and August 2022, according to a report from the Bureau of Labor Statistics. The reading marks a decline from the 8.5% year-over-year rate seen in July 2022 and the 9.1% year-over-year rate seen in June 2022 as gasoline prices gradually decrease. However, month-over-month prices for food, shelter, and medical services ticked upward, while core inflation - a metric that excludes food and energy prices, which tend to be more volatile - continued to rise.
Income has nevertheless failed to keep pace with rising costs. Although nominal wages have increased between August 2021 and August 2022, real average hourly earnings - which consider the impact of inflation - decreased 2.8% over the same period, according to another report from the Bureau of Labor Statistics. A decrease in the average workweek by 0.6% implied a 3.4% overall drop in real average weekly earnings.
Meanwhile, Federal Reserve Chair Jerome Powell recently indicated his willingness to "bring some pain"
while combating inflation. Interest rate hikes from the central bank dampen prices by increasing the cost of borrowing money for businesses and consumers. "Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy,"
Powell remarked at a speech in Jackson Hole, Wyoming. "Without price stability, the economy does not work for anyone."
Rising interest rates have led to mortgage rates surpassing 6%, according to data from government-backed mortgage company Freddie Mac, even as residential real estate prices soar. Home prices are expected to increase another 4% in 2023 - a relative slowdown from 17.8% in 2021 and 12.8% in 2022.
"The Federal Reserve's action to help manage inflation has created significant volatility in mortgage rates and, by extension, the housing market,"
Freddie Mac Chief Economist Sam Khater explained in a press release two months ago. "Although house price appreciation will grow at a more moderate rate, home prices remain high relative to homebuyer incomes. Taken together, these factors are exacerbating affordability challenges and causing a slowdown in the housing market."
A bright spot in an otherwise bleak economic landscape, however, has been the labor market, which is maintaining unemployment rates well below historic norms. Yet joblessness rose last month to 3.7% even as more Americans returned to work, according to a release from the Bureau of Labor Statistics.