The United States is not currently in a recession, but there is a real possibility that it could happen soon, the Washington Post reported. The booming economy of 2023 is over, and the situation is now fragile.
The report added to the writer “Heather Long” that economic growth is steadily declining, and consumers are no longer showing off what they own, but are now looking for real value. “Business leaders have become cautious, at a time when hiring in most industries is slow or non-existent.”
weak economic conditions
The newspaper talked about the jobs report issued on Friday, which reflected weak economic conditions. Hiring in August was weaker than expected, job growth figures for June and July were revised downward, and unemployment has been steadily rising since the beginning of the year, meaning that there are now a million more Americans out of work than there were last summer.
The newspaper warned that continued layoffs could cause more individuals and companies to cut back on spending, which in turn could lead to more job cuts and the possibility of the economy entering a recession.
The writer said that the Federal Reserve (the US central bank) could take an effective step to stop this deterioration and prevent a recession by cutting interest rates decisively.
The Federal Reserve has set its benchmark interest rate at around 5.5% to combat inflation, its highest level in two decades.
She added that the Federal Reserve should turn its attention to the labor market and take swift action to address the high rates of layoffs.
The writer wondered about the amount of interest rate cut that the Central Bank might resort to on September 18th. Would it be a modest cut of a quarter of a percentage point to reach 5.25%, or would it be larger, falling to about 5%?
The writer expected the reduction to be modest, by 25 basis points, as the bank’s chairman, Jerome Powell, will stress that the economy still appears strong, and that the reduction must be gradual.
The writer considered that the modest reduction may be a mistake, that the greater danger lies in not taking sufficient measures to confront the decline in employment.
She said that the Federal Reserve’s larger cut this month would reflect its seriousness in dealing with warning signs and its attempt to avoid the worst-case scenario. This, in the writer’s opinion, would quickly restore Americans’ confidence in the economy.
She added that a large interest rate cut this month would reflect the Fed’s commitment to maintaining economic stability.
The writer noted that Powell does not like to think about politics when making his decisions, but it is worth noting that the next important Fed decision after this month is on November 7, two days after Election Day. This fact increases the possibility that any urgent economic measures will be postponed in September, as the Fed may prefer to avoid taking drastic measures during a sensitive political period.
