Opinion: There's a reason the U.S. economy soared and others were mediocre - WaPo Heather Long

[question everything]

There’s only one appropriate word to describe the U.S. economy in 2023: “miracle.” Many experts said a recession was inevitable. They said there was no way inflation would ease without massive job losses. They were wrong. Not only was there no recession in 2023, but growth accelerated as the year progressed. Inflation cooled sharply (from 6.4 percent to 3.1 percent), and the economy added more than 2.5 million jobs. This doesn’t mean everything was perfect, but it’s important to celebrate the economic equivalent of an underdog athlete winning gold. And to ask: How did it happen?

The most straightforward explanation is that it took a lot longer than almost anyone predicted to get back to normal after the pandemic. Inflation also turned out to be largely caused by supply problems. That’s unusual. Normally, demand is what causes prices to spike. The Federal Reserve then hikes interest rates to kill demand, but this typically brings big job losses and a recession. This round was different because, after the pandemic, it took a long time to fix supply chains. Plus, there was a labor supply problem, as it took a while to get enough people back to work. As supply glitches abated in 2023, inflation subsided around the world.

This isn’t the full story in the United States. Americans kept their spending sprees going all year long. This, too, was a big surprise. Experts had predicted spending would nosedive as people depleted their pandemic savings, and polls showed that Americans were gloomy, rating this economy as “fair” or “poor.” Yet people kept spending as though the economy were booming. JPMorgan ran the numbers and found that Americans are spending more now than they did before the pandemic, even after adjusting for inflation. This isn’t happening elsewhere in the world. In Europe and Japan, for example, consumers are spending the same as they did pre-pandemic.

(snip)

Something more was also at play: In recent years, Americans have grown wealthier, and not just the rich. Households across the income spectrum have seen the largest surge in wealth on record. This was driven mainly by a surge in the U.S. stock market (nearly 60 percent of families now have some stock ownership, generally via retirement funds) and a gigantic rise in home values. The vast majority of homeowners locked in mortgage rates under 5 percent, which insulated them from the Federal Reserve’s painful rate hikes. (Most other countries do not lock in a mortgage rate for 30 years, and this leaves their homeowners far more exposed to interest rate hikes.) Meanwhile, U.S. home values soared. People feel wealthier, even if they haven’t actually sold their homes or stocks. When people feel wealthier, they tend to spend more.

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https://wapo.st/3TKJQx0

(free)

[sinkingfeeling]

1. They waited until the last sentence....

"As for Biden, he deserves more credit than he’s getting."

[gab13by13]

2. Bidenomics Baby