The following six data points provide an overview of the current state of the American economy. Economists use leading economic indicators to gauge the earliest drivers of economic expansion. Throughout 2022, the unemployment rate has stayed consistently low. In August of 2022, the unemployment rate was 3.7%.
An increase from the 3.5% seen in July, which was at or below pre-pandemic levels, that number is still historically low. In Q2 2022, gross domestic product dropped for the second consecutive quarter, falling 0.6% after 1.6% in Q1 2022.
In the second quarter of 2022, orders for durable products like machinery and equipment declined by 0.1%, while orders for nondurable items like medicines, food, and lodging fell by 3.7%.
Employment and Joblessness
In August 2022, the economy added 315,000 new jobs as businesses kept hiring. The number of people added to payrolls by firms is tallied each month and reported by the Bureau of Labor Statistics in its employment report. Due to the cyclical nature of farming, seasonal laborers are not included.
Production employment is a crucial benchmark. When factories start laying off people, it may be a sign that a recession is on the horizon. The industrial sector shed 1.3 million jobs in April 2020. As of August 2022, manufacturing employment was just marginally higher than it had been before the epidemic.
Employment was 3.7% in August 2022, up from 3.5% before the epidemic. There were almost 6 million people who were out of work altogether.
Economy-Wide Productive Effort
In the second quarter of 2022, GDP was down 0.6% from the previous quarter as GDP decreased again in Q2 2022, following a 1.6% drop in Q1 2022; many wonders if the United States is approaching a recession. However, while these declines are cause for concern, they pale compared to the economic hit the original COVID-19 pandemic delivered.
The second quarter of 2020 was the steepest quarterly decline in GDP in American history, at 31.2%. Before then, in the first quarter of 1958, they had the steepest quarterly decline, a reduction of 10.0%. Although a pattern of declining GDP is often indicative of a recession, the National Bureau of Economic Research is the only organization with authority to officially label economic downturns in the United States.
Resilient Products
After rising by 5.9% in the first quarter of the year, sales of durable goods fell by 0.1% in the second quarter. Any product with three years or more shelf life is qualified as a durable good. People put off making these kinds of expensive purchases until they need them. Because people only buy them when they feel secure about the future, they are a fantastic barometer of economic well-being.
Rates of Interest
As of July 2022, the target range for the federal funds rate was 2.25% to 2.5%. Long-term, the Fed funds rate target range should correspond to an inflation rate of 2%. This translates to more affordable borrowing conditions for corporations and individuals.
Because of the widespread Covid-19 virus, the Federal Reserve kept its target rate range low to stimulate lending, economic expansion, and overall employment and inflation. However, on March 16, 2022, the Federal Open Market Committee announced that interest rates would be increased for the first time since December 2018 in response to rising inflation.
Inflation
In July of 2022, the annual inflation rate, measured by the Consumer Price Index (CPI), was 8.5%. The rate at which prices are rising is known as inflation. If inflation is modest, consumer demand is not strong enough to drive higher prices. When inflation is significant, consumer goods and service prices rise relative to those paid a month or year before.
Annual PCE price index inflation was 6.3% in July. Since food and gas costs tend to fluctuate widely, the core inflation rate excludes these, and the year-over-year rate eliminates the effect of seasonal changes. Because of these factors, the Federal Reserve keeps an eye on the PCE core inflation rate.
Exchange For Stocks
Profitability in business may be reflected in the stock market. Furthermore, it reveals how the market anticipates the economy will perform. Surprisingly, the stock market bounced back strongly following the epidemic, with the S&P 500 recording new highs almost daily from October 2020 through December 2021.
The Dow Jones Industrial Average reached a new all-time high of 36,432.22 on November 8, 2021. On January 4, 2022, the market ended at a new all-time high of 36,799.65.21. While the Nasdaq Composite and the S&P 500 rose throughout 2021, they both had corrections in January of the following year. All three indices began falling in early 2022 while remaining higher than in January 2021.
