**This is Day 1 in the new series Boosting Biden**
It is easy to forget that that not too long ago, everyone seemed certain a recession was coming.
Many forecasters predicted a recession at 2023s outset, some even asserting it with a 100% probability.
Everyone expected a recession
“Forecast for US Recession Within Year Hits 100% in Blow to Biden,” a Bloomberg headline flashed in fall 2022. Larry Summers, the former Democratic treasury secretary and frequent Fed critic, said unemployment would have to spike for inflation to come down. Businesses said they were girding for a downturn.
“So many economists were saying there’s no way for inflation to get back to normal without it entailing a period of high unemployment, [or] a recession. And a year ago, I think many economists were saying a recession was inevitable,” Yellen said at a Wall Street Journal event last week. “I’ve never felt there was a solid intellectual basis for making such a prediction.”
But this didn’t happen.
U.S. economy will pull off soft landing in 2024, CBO projects
The U.S. economy is on track to avoid a recession next year as inflation returns to normal, according to new economic projections released by the Congressional Budget Office.
We had an economic soft landing that few anticipated.
How?
The Fed and White House found a way out
the economy ended 2023 in a remarkably better position than almost anyone on Wall Street or in mainstream economics had predicted, having bested just about all expectations time and again. Inflation has dropped to 3.1 percent, from a peak of 9.1. The unemployment rate is at a hot 3.7 percent, and the economy grew at a healthy clip in the most recent quarter. The Fed is probably finished hiking interest rates and is eyeing cuts next year. Financial markets are at or near all-time highs, and the S&P 500 could hit a new record
That strength and stability — defying even many of the most optimistic predictions — represents a remarkable development after seemingly endless economic crises that started with the 2020 coronavirus pandemic and continued through an inflation spike
Biden’s typically staid treasury secretary gave an unusually direct rebuke, telling reporters that economists who predicted that lower inflation would require widespread layoffs were now “eating their words.”
“It tested your resolve: We were constantly testing and resting the assumptions we were operating under, because it was such a brutal period,” said Brian Deese, who served as the director of the White House National Economic Council during Biden’s first two years in office, referring to last year’s inflation peak. “But I do think the White House deserves some credit for staying consistent, and for the president’s conviction that you could transition to strong and stable growth without a recession, even as we were being constantly questioned and doubted.”
Powell and Biden officials consistently maintained that they could get inflation under control without causing a major spike in joblessness. Fed officials often pointed to an excess of job openings and vacancies, believing employers could take those postings down instead of laying off workers.
How did Biden contribute to this?
The White House, for its part, deployed a range of tools in service of Biden’s claim that fighting inflation was the administration’s “number one priority” as Democrats clamored to get prices under control.
In October 2021, the administration successfully cajoled ports to operate 24/7 in a push to unsnarl delays that pushed up prices. The White House greenlighted significant expansions of oil drilling to lower energy prices, and announced the largest-ever release of the nation’s strategic fuel reserves as gas prices rose, overriding complaints from climate experts and other allies.
Biden vowed not to interfere in the Fed’s campaign to raise interest rates. He rejected calls on the left for more dramatic actions that some economists cautioned could have made the problem worse, such as price controls. Meanwhile, the right demanded that Biden reduce government spending. The White House decided to pursue major new federal programs anyway, arguing that the efforts — on infrastructure, domestic semiconductor production and clean energy — would help inflation by expanding the economy’s productive capacity.
Ultimately, the economy would grow by a whopping 5.2 percent between July and September, stunning economists who had balked at forecasts in that ballpark. Pile on a string of encouraging inflation reports from late summer, and big Wall Street firms repeatedly slashed their odds of a recession
Growth was stronger than expected a year ago.
Defying pessimistic forecasts, US economic growth has progressed at a significant pace over the course of 2023. Last December, the private consensus for real economic growth as measured by the Blue Chip Economic Forecast was negative 0.1% for the year. The latest Blue Chip projection for 2023 growth, incorporating all available data to date, is positive 2.6%, driven by strength in consumer spending, a revival in manufacturing structures investment and increased state and local government purchases. The level of US real GDP in 2023 even exceeded some pre-pandemic forecasts, including that of the Congressional Budget Office and the International Monetary Fund. Sound household balance sheets and a strong labor market are the primary drivers of US consumer expenditures, which continue to grow at a pace close to the average among prior expansions.
Jobs growth cooled towards a steady & stable pace, while the unemployment rate stayed low despite falling inflation.
Job gains continued at a very strong pace in 2023, although down from the torrid rates seen in 2021 and 2022 immediately following the pandemic recession. Monthly nonfarm payrolls grew by 232,000 per month on average in 2023, 55,000 more jobs per month than the average pace in 2018 and 2019. As a result, total job gains achieved under the Biden administration reached 14.1 million through November 2023. Meanwhile, the unemployment rate has, to date, stayed below 4% for 22 straight months, a run not seen in more than 50 years. This is especially remarkable given the fall in inflation.
Is there still more work to be done? 100%! Lots more work. But Biden did more than many people guessed could be done. And he Deserves a lot of credit. AND he deserves to be re-election.
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This is an entry in our new series Boosting Biden
A new series, Boosting Biden, started on 1/1:
- Daily diaries.
- Monday through Friday at 7:30 am eastern.
- Every diary:
- A Biden accomplishment.
- An invitation to donate.
- Action steps.
- From January 1st to the election.
- We welcome ideas and suggestions!
- Your favorite JB accomplishments?
We need your support and ideas!: