The slowdown reflects the impact of the Federal Reserve’s aggressive drive to tame inflation.
The worst fears of a 2008-style financial crisis have eased over the past month. But lingering credit cutbacks, which were mentioned in the Fed’s survey this month of regional economies, is likely to hobble growth.
Political risks are growing, too. Congressional Republicans are threatening to let the federal government default on its debts, by refusing to raise the statutory limit on what it can borrow, if Democrats and President Joe Biden fail to agree to spending restrictions and cuts. A first-ever default on the federal debt would shatter the market for U.S. Treasurys — the world’s biggest — and possibly cause a global financial crisis.The global backdrop is also looking bleaker.
Still, the U.S. economy has surprised before. Recession fears rose early last year after GDP had shrunk for two straight quarters. But the economy roared back in the second half of 2022, powered by surprisingly sturdy consumer spending. A strong job market has given Americans the confidence and financial wherewithal to keep shopping: 2021 and 2022 were the two best years for job creation on record. And hiring has remained strong so far this year, though it has decelerated from January to February and then to March.
The jobs report for April, which the government will issue on May 5, is expected to show that employers added a decent but still-lower total of 185,000 jobs this month, according to a survey of forecasters by FactSet.
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