The economy’s strength and stability — defying many of the most optimistic predictions — represents a remarkable development after seemingly endless crises
As 2023 winds to a close, Powell and his colleagues are far from declaring victory on inflation. They routinely caution that their actions could be thwarted by any number of threats, from war in the Middle East to China’s economic slowdown. Americans are upset about high costs for rent, groceries and other basics, which aren’t going back to pre-pandemic levels. The White House, too, is quick to emphasize that much work remains.
Yet the economy is ending the year in a remarkably better position than almost anyone on Wall Street or in mainstream economics 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 this week, too.
Plus, counterintuitively, rent is starting to fall in many major metro areas because we’re finally seeing a notable uptick in inventory. The price of a dozen eggs is back in the neighborhood of where it was pre-Covid, and the price of a gallon of gas has wiped away almost all of its 2023 gains and is now back to roughly what it was before Russia invaded Ukraine. Not saying people across the board aren’t struggling since the pandemic, because I’m sure they still feel it in a very real way, but prices are very obviously stabilizing across the board and the S&P is obviously responding to really solid underlying trends.