If current economic trends continue, 2022 will be the year when danger flares, alarms go off and enough emergency intervention is done to prevent disaster.
The biggest economic news of 2022 was inflation. Gasoline prices peaked at 9.1% in June, reaching $5.02 per gallon in the same month. Since then, inflation has moderated. Year-over-year inflation is currently at 7.1%. Gasoline prices plummeted to about $3.15. Improved confidence surveys It suggests that consumers have noticed.
The Inflation Police, also known as the Federal Reserve, has admitted that it has taken too long to stem inflation. The Fed’s first rate hike he did in March, with inflation already at 8.6%. The Federal Reserve (Fed) has hiked rates by nearly 4 percentage points this year, one of the fastest tightening cycles in history. The Federal Reserve wants inflation down to 2%, but if all else seems fine, it may accept 3% for some time.
What happens in 2023 will tell if 2022 ends well. As one prominent group of forecasters predicted: Inflation below 3% By the end of 2023, the unemployment rate will gradually rise from 3.7% today to 4.4% in a year’s time. It’s a desirable ‘soft landing’, where the economy cools, but it’s very gradual with no recession. With wages finally outstripping inflation and improving consumer and business purchasing power, a strong recovery could set the stage for the second half of 2023.
With 2023 going that way, the final two years of a Biden presidency will be a powerful tailwind. [first?] Presidential term. Biden’s first major setback came in the summer of 2021, during the failed withdrawal of US troops from Afghanistan and the collapse of the US-backed Afghan government. Biden argued that inflation was temporary and that the sharp rise in prices proved him wrong, leading to further declines.
his approval rating In July 2022, shortly after gas prices hit an all-time high, they hit a dismal 38% bottom. This suggests that the Republican Party will go on a rampage in his November midterm elections, which are often referendums on the performance of the incumbent president.
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But Biden and his fellow Democrats rallied. In August, Biden signed Inflation control law (IRA), despite its name, primarily funds green energy projects that help reduce carbon emissions. The bill contained many provisions widely supported by Americans, but did not include the more controversial social welfare measures. There will be no meaningful backlash to the IRA to nag Biden as President Obama did against the Affordable Care Act later on.
of chip methodBiden also signed in August .industrial policy” and may have unintended consequences.But for now Biden Continuing the epoch-making exhibition of the factory Boasting tech production is back in America.
After two quarters of negative GDP growth at the beginning of the year, production recovered and posted a solid 3.2% GDP growth in the third quarter. The unemployment rate he remains very low at 3.7%. Economists express disbelief that employers continue to create 335,000 new jobs each month.
Biden and his fellow Democrats dodged a bullet in the midterms, retained the Senate and lost the House by a much narrower margin than expected. Or should have been. A president’s party almost always loses support in midterm elections. This is especially true when there are economic headwinds. High inflation certainly qualifies.
Republicans failed in the midterm elections. They put forward some ridiculous Trumpian candidates and were on the wrong side of voters on abortion rights, a top three issue in the campaign now that the conservative Supreme Court overturned Roe v. Wade.
Biden can make a decent case that Democrats won on merit. Did. Biden has also provided vital leadership in helping Ukraine fight Russian aggressors.
Socialists left within Biden’s party have been unable to impose all of running government on voters. Biden’s self-proclaimed pragmatism looks somewhat legitimate.
There is one missing part. Biden’s approval rating is still below the surface, at a low 43%. That’s improved a bit now that inflation has fallen, but voters are clearly reluctant for Biden. If a recession is to come, it needs to start and end quickly without any more surprises. The Federal Reserve needs to see enough progress against inflation to stop raising interest rates so the housing market can stabilize. I hope stocks recover after the 2022 bear market.
Biden may be pretty happy with the end of 2022, but he needs steady improvement in 2023 if he wants to be a popular president again. He said he plans to run for re-election in 2024, even though he will be 82 years old. Biden’s age and health will influence that decision, but the direction of the economy in 2023 will also be considered.
Rick Newman Yahoo FinanceFollow him on Twitter. @rickjnewman
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