The U.S. economy received an unusually strong endorsement Wednesday from an unexpected source: Federal Reserve Chairman Jerome Powell.
“This is a good situation. Let's be honest. “This is a good economy,” Powell told reporters on Wednesday after concluding a central bank meeting to set interest rates.
Powell's praise is likely to be welcomed by the White House as it launches new efforts to address the economy, which remains a political weak point for President Joe Biden.
Almost all major economic indicators have turned upward in recent months, and inflation, the economy's most visible Achilles' heel, has actually taken a turn for the better. But polls show that the public is only slowly becoming convinced that the economy is in good shape, with Republicans in particular convinced that it is bad.
A Economist/YouGov poll, The poll, conducted Sunday through Tuesday, found 42% of respondents approved of Biden's handling of the economy, compared with 50% who disapproved. However, by party, 78% of Democrats approved while 83% of Republicans disapproved.
Powell focused his remarks on the economy's strengths when asked how he would describe them.
“The summary would be that growth over the last year has been solid to strong,” Powell said.
“The job market, 3.7% unemployment, shows the job market is strong. We have had an unemployment rate of less than 4% for almost two years now. That hasn't happened in 50 years. So it's a good job market. And we’ve seen inflation come down.”
The The economy grew at a solid pace of 3.3% in the last three months of 2023 and 2.5% for the full year – a stunning result given that economists were almost unanimous at the start of 2023 that a recession was inevitable. In December the unemployment rate was 3.7% and The economy created 216,000 jobs. Inflation, the rate at which prices rise, grew a pace of 0.3% for the month.
There are signs that voters are starting to see a brighter outlook on the economy. A consumer sentiment survey earlier this month showed it the highest level since July 2021. That finding was confirmed Tuesday in a similar but separate consumer confidence surveywhich rose to its highest level since December 2021.
In one formal statementThe Fed's committee, which sets interest rates, said it was unlikely to cut them until it was assured that inflation was moving closer to the central bank's 2 percent target. This has dashed the stock market's hopes that interest rate cuts could come as early as March Stock prices fell after the news.
Powell himself warned against complacency and said risks remain, including a slowing labor market.
“We expect growth to moderate,” he said. “Obviously we’ve been expecting this for some time and it hasn’t happened.”
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