At the start of the year, Joe Biden is triumphing and he has a few economic arguments to make. The unemployment rate fell in December 2022 to 3.5%, according to figures published Friday, January 6 by the US Department of Labor. “The unemployment rate is at its lowest for fifty years. We have just completed the two strongest years of job growth in history”, rejoices the President of the United States in a press release. Indeed, with 223,000 additional jobs in December, the year 2022 saw America create 4.5 million jobs, after the 6.5 million of 2021, the first year of the post-Covid rebound.
“We still have work to do to reduce inflation and help American families who are under pressure from the cost of living”adds the Democratic president, who assures: “But we are going in the right direction”. Sure enough, the jobs stats contain two reassuring news for inflation: job growth is finally slowing – the December 2022 figure was the weakest in two years, down for five months and nowhere near 714 000 creations of February 2022; while wage pressure is easing: hourly wages only increased by 0.3% between November and December 2022, compared to 0.4% the previous month. Over one year, the increase was 4.6%, against 4.8% in November, this figure having itself been revised downwards by 0.3 points.
The United States therefore begins to dream of a soft landing, where the Fed, the American central bank, would manage to curb inflation without having to raise its rates too suddenly and thus avoid recession. This scenario is favored by big banks like Goldman Sachs and Morgan Stanley, even if American economists estimate on average that the United States has a two in three chance of experiencing a recession in 2023. Wall Street was optimistic on Friday, with a first rise for the year, with the S&P 500 index ending the day up 2.28%. On the left, the Nobel Prize in Economics Paul Krugman was also jubilant on Twitter : “Currently, wage and price data suggest an economy just above target inflation – with 3.5% unemployment! A super soft landing field is almost too good to believe”. The Fed forecasts growth of 0.5% for this year, as in 2022.
A budget deficit halved
A little backtracking is in order. 2022 starts very badly, when the Fed understands belatedly that inflation is not temporary: it has spread throughout the economy, due to the bottlenecks that are slowing down the economy (blockade of China , microprocessor shortages, soaring commodity and energy prices, labor shortages), while the Fed’s zero rate policy and the anti-Covid stimulus packages of Donald Trump and Joe Biden create excessive demand.
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