July 6: When I’m wrong, I’m wrong… unless I’m not

In which, I may be wrong for once (or twice, or three times…), someone brought crack to the White House, and the war in Ukraine contributes to hunger in Africa.

When I’m wrong, I’m wrong… unless I’m not

At the end of last year, I argued that a recession was a “high probability” event for the US economy in 2023. Since that time, I’ve frequently noted the less than stellar data points on the economy, but here we are halfway through the year with no recession, and people are cautiously optimistic. That’s the good news, and what I’ve been wrong about…so far.

While the US economy has not necessarily improved, it hasn’t gotten worse, which is a bit of a win, especially as many other global economies have slipped towards recession (and it hasn’t necessarily boosted confidence in the developed economies of the world).

Still, there may be a longer lag here as consumer debt climbs while inflation continues to eat into savings of many households (albeit at a slower rate). The policy interventions of the Biden administration  and the Fed appear to be holding harsher economic conditions at bay for now, but I’m still skeptical about how long those could last, and here’s why.

At the macroeconomic level, inflation has slowed a bit, job reports remain good, and Biden’s big spending programs are starting to go into action, all keeping that economic pump primed and the GDP in the positive.

HOWEVER, at the micro level, the distribution of those federal funds are being concentrated in particular sectors and states, which means an uneven distribution of economic benefits. Meanwhile, home prices continue to put a home beyond the reach of most families, and (in one of the odder data points) Google searches for nearby pawn shops are increasing. 

So, even if the macroeconomic picture is looking good and stable, it’s coming at the price of less economic stability for average Americans.