Curtis Dubay
Chief Economist, U.S Chamber of Commerce

Published

January 27, 2023

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Updated periodically, Economic Viewpoints provides a snapshot of the U.S. economy from the Economic Policy Division at the U.S. Chamber of Commerce.


2022 Ends with Strong Economic Growth

January 27, 2023 

As expected, the economy grew sharply at the end of 2022. GDP expanded by 2.9% in the 4th quarter (from October through December).

By the numbers: We estimated the economy would grow by 2.5%, so we were right in line with the actual data.

  • Consumer spending rose 2.1%
  • Business investment rose 0.7%
  • Residential investment fell 27%
  • Inventory build-up added 1.5% to GDP growth
  • Trade added more than 0.5% to growth as imports fell (-4.6%) more than exports (-1.3%)
  • Government spending rose by 3.7%

Why it matters: Consumers still spent in the fourth quarter and drove growth. The drop in residential investment, while large, was expected because of higher interest rates. The inventory build is also good news because businesses have been plagued by supply problems. They needed to add inventory.

Be smart: It is of course good news that the economy was robust at the end of last year. But that’s in the past. Growth looks to be falling in 2023.

  • The economy is slowing because consumers can’t keep up with inflation anymore, even as inflation falls. Consumers have run out of savings and run up their credit card balances. And even though their wages are growing, they aren’t growing as fast as inflation. Inflation-adjusted spending is starting to drop, which we see in the most-recent retail data.

Looking ahead: The 2.9% growth in Q4 2022 will be the strongest quarterly growth rate until at least 2024, and most likely late 2024 or into 2025. We have mostly avoided paying a macroeconomic cost for high inflation, but the cost is finally coming due. 


Eggflation Scrambles the Nation

January 25, 2023

Through December, egg prices rose a whopping 49% over the past year. According to the latest data released from the Federal Reserve, the average cost of a dozen eggs in the U.S. is currently sitting at $4.25.

Why it matters: Food prices across the board are rising. The Agriculture Department’s most recent analysis shows that food-at-home (not dining out) costs for November 2022 are up 12% over the same time last year. Even still, eggs are an outlier. So, what’s the deal?

Dig deeper: There are numerous factors affecting the price of eggs, but two stand out:

  1. Flu season is hitting the birds. Hard. Avian flu has affected 47 states, with Iowa being the hardest hit with over 15.9 million birds affected. Across the state, America’s leading egg producer, millions of birds are being culled.
  2. Inflation is impacting the costs associated with raising hens and producing eggs. Animal feed, packaging, and labor are all making it more costly to get from the chicken to the egg. Or is it the other way around?

Bottom line: The USDA’s Egg Markets Overview for last week saw a slight easing in pricing, but producers are at the mercy of the avian bird flu. It is market forces, not nefarious poultry farmers that are driving prices higher, as some have suggested.

- Richard Harnett, Associate Manager, Communications and Strategy, U.S. Chamber of Commerce


Retail Sales Slump in December

January 20, 2023

retail sales down december 22

Retail sales fell a sizeable 1.1% in December. That is after a 1% drop in November. Consumer strength is wavering.

Why it matters: Surprising consumer strength has buoyed the economy since COVID, but it finally seems to be buckling under the weight of inflation.

The broad weakness in the spending data shows no sectors are being spared from consumers pulling back.

By the numbers: Sales were down in almost all categories of spending:

  • Motor vehicles and parts dealers (-1.2%)
  • Furniture stores (-2.5%)
  • Electronics and appliance stores (-1.1%)
  • Health and personal care stores (-0.9%)
  • Gas stations (-4.6%)
  • Clothing and accessory stores (-0.3%)
  • General merchandise stores (-0.8%)
  • Food and drinking places (-0.9%)

But: Sales were up at:

  • Building material and garden supply stores (0.3%) and
  • Sporting goods and hobby stores (0.1%)

Be smart: There is an ongoing shift in consumer spending from goods to services and experiences. Spending on those is not included in this data.

  • Overall spending may be stronger once accounting for that, but it is unlikely to be strong enough to offset the drop in spending on goods.

Bottom line: The drop in consumer spending has been long-anticipated. It is a major reason many forecasters predict a sluggish 2023.


Consumers Feel Slightly Better about the Economy

January 18, 2023

Consumer Sentiment Up in January

Consumer Sentiment rose for the second straight month in January.

Why it matters: It is now at its highest level in a year but well below historical norms and far below where it was before the pandemic.

Be smart: Consumers are feeling slightly better about the economy because they are feeling better about the current level of inflation.

  • Inflation has eased some in recent months, putting less strain on consumers’ budgets.

Looking ahead: While it is good news that consumers are feeling better, we have a long way to go to be at a point where we can say they feel good about the economy. In fact, June 2022 was the lowest reading ever for Consumer Sentiment and we still aren’t that much higher than that.


Inflation Fell in December But Remains High

January 13, 2023

Inflation Chart December

Inflation fell 0.1% in December. When compared to a year ago, inflation increased 6.5% on an annual basis.

Why it matters: Overall inflation cooled more in December, but core prices, excluding more volatile food and energy prices, rose 0.3% in December. On an annual basis core prices are up 5.7%, which is still high.

Details: The monthly decline in overall inflation was driven mostly by a 9.4% drop in gas prices. Prices also declined for used cars and trucks and airline fares. Prices increased for housing, household furnishings and operations, motor vehicle insurance, recreation, and apparel.

But: Price increases for necessities continues putting enormous pressure on family budgets:

  • Grocery prices were up 0.2% in December and 11.8% annually.
  • Electricity was up 1% on the month and is up 14% annually.
  • Housing costs were up 0.8% and are up 7.5% annually.

Bottom line: This latest data could fool some into believing inflation is better than it is. The drop in gas prices deflects attention from the strong rise in core goods and services. That core prices are still rising sharply means the Fed will need to remain vigilant in its efforts to bring prices down. 


December Jobs Report Exceeds Expectations 

January 11, 2023

labor force participation 2.95m

The economy added 223,000 jobs in December. Expectations were for 200,000, which we exceeded.

Why it matters: Despite the headwinds of inflation and rising interest rates, the jobs market is retaining its impressive strength.

Big picture: Just as important, the labor force grew by 439,000. Participation declined the previous three months, so this is a welcome development.

  • The workforce is now 383,000 above its pre-pandemic participation level and the participation rate rose in December for the first time since August.

Be smart: We still have a way to go. If we had the same participation rate now as in February 2020, there would be 2.95 million more workers in the labor force.

  • Wage gains were strong again, rising 0.3% from November and 4.6% annually from December 2021.
  • Strong job growth and wage gains will bolster the economy as it slows because of inflation and rising interest rates. It should allow consumers to continue their ability to spend.

Looking ahead: A strong labor market complicates the Fed’s job of lowering inflation, as it interprets a weaker jobs market as a sign its anti-inflationary policies are working. But if inflation comes down as it has been, and we retain a robust jobs market, that would be the ideal scenario.


Job Openings Remain High

January 6, 2023

4.45 million jobs

The latest job openings data shows that businesses are still struggling to find workers.

Why it matters: There are 4.45 million more job openings than unemployed workers.

By the numbers: Job openings were 10.5 million at the end of November.

  • That is down 54,000 from October.
  • Job openings increased in professional and business services (212,000) and in nondurable goods manufacturing (39,000).
  • They decreased in finance and insurance (75,000) and in federal government (44,000).

Be smart: The quit rate was 2.7% in November. That is below the all-time high rate of 3%.

  • 4.2 million people quit their jobs in November, down from the 4.45 million all-time high in March, but it is still historically high.

Bottom line: The cooling economy is causing openings to drop, but not by much. The labor market remains tight. Hiring and quits remained at roughly the same level as October. So businesses are still adding workers and workers are still confident they can quit their current jobs and find better ones easily.

  • The still-strong labor market is a big part of our narrative on the economy of “second-hand pessimism.” Businesses say the economy is poor, but they’re still hiring as if it’s strong.

Consumers Continued Spending in November

January 4, 2023

consumption rose in november

Before Christmas, we received consumer spending data for November, showing spending rose 0.1%.

  • Inflation was also 0.1% in November, so inflation-adjusted spending was flat.

Why it matters: That still counts as good news as analysts continue to wait for the bottom to drop out of spending because of inflation. It still hasn’t happened as consumers keep spending.

Be smart: They’re able to do so for three reasons:

1. Incomes are rising. Income rose 0.4% in November and salaries and wages 0.5%. Both are well above inflation.

2. Savings. Consumers still have a reservoir of savings to draw from. Excess savings during COVID were pushing $3 trillion. They’ve dwindled closer to $1 trillion now, but that is still a lot of available money consumers are using to keep spending.

3. Inflation is easing. Inflation fell sharply from October to November, which took pressure off consumers’ budgets. Importantly, core inflation, excluding food and energy, also fell.

Looking ahead: Holiday sales numbers will be another indicator of whether consumer strength remains. We will get that data soon. But there is little reason to think it won’t jibe with other strong spending data.


What to Expect for the Economy in 2023

December 20, 2022

possible 2023 recession chart

The Chamber recently convened its Chief Economists Committee to discuss members’ outlooks for the economy in 2023.

Why it matters: The consensus is for a mild but short recession in the middle of 2023. The recession would be caused by consumer and business spending falling because of rising interest rates. A further cause would be consumers finally exhausting their COVID savings, meaning they would no longer have that source of money to keep spending at pace with inflation.

Be smart: Businesses are finding it increasingly difficult to pass along higher prices for their inputs to their customers. This was made clear in the RSM-U.S. Chamber of Commerce U.S. Middle Market Business Index. This will likely mean shrinking profit margins.

  • Members pointed out this will likely be the first recession in memory where there will be no extra assistance – other than automatic stabilizers – from fiscal or monetary policy. Congress sending recession relief to families and the Federal Reserve loosening monetary policy would both make inflation worse, and hence be self-defeating, since inflation is the primary economic challenge right now.

Looking ahead: Members of the committee were also in consensus that inflation will come down significantly next year. They see the Federal Reserve’s anti-inflationary policies curbing demand and tightening financial conditions enough to start bringing prices down much closer to the Fed’s 2% inflation target over the course of 2023.


Retail Sales Fall 0.6% in November

December 15, 2022

retail sales down

Retail sales fell a sizeable 0.6% in November after a strong gain of 1.3% in October.

Why it matters: Inflation was 0.1% in November, so retail sales, adjusted for inflation, was slightly lower than that topline figure.

By the numbers:

  • Sales were down at motor vehicles and parts dealers (2.3%), furniture stores (2.6%), electronics and appliance stores (1.5%), building material and garden supply stores (2.5%), gas stations (0.1%), clothing and accessory stores (0.2%), sporting goods and hobby stores (0.6%), general merchandise stores (0.1%), and non-store retailers (mostly online sellers) (0.9%).
  • Sales were up at food and beverage stores (0.8%), health and personal care stores (0.7%), miscellaneous stores (0.5%), and food and drinking places (0.9%).
  • A sharp decline, even coming after a big gain the month before, isn’t a good sign. It is a signal that the strength consumers have exhibited since COVID struck could be waning.

Looking ahead: There is an ongoing shift in consumer spending to services and experiences. Spending there is not included in this data set. So we need to see full spending data before knowing how big a deal this decline is.


Inflation Rose 0.1% in October

December 14, 2022

consumer prices rose annually

Inflation rose 0.1% in November from October. When compared to a year ago, inflation increased by 7.1% on annual basis.

Why it matters: The monthly figures show inflation is cooling. Annual inflation has fallen some in the last few months but remains very high. Inflation is getting better, but we are still a long way from the 2% target annual rate.

Be smart: Core prices, excluding more volatile food and energy prices, rose 0.2% in November from October. On an annual basis, it is up 6%, which is still high.

  • Prices for housing, communication, recreation, motor vehicle insurance, education, and clothing all rose. Used cars and trucks, medical care, and airline fares saw price drops.

By the numbers: Price increases of necessities are still putting enormous pressure on family budgets:

  • Grocery prices were up 0.5% from October to November and 12% annually.
  • Gas prices fell 2% from October to November but are up 10% from a year ago.
  • Electricity was down 0.02% on the month but is up 14% annually.
  • Housing costs were up 0.6% from October to November and are up 7.1% annually.
  • New car prices were flat from October and are up 7.2% annually.
  • Used car prices fell by 3% and are down 3.3% annually.

Bottom line: The Fed is likely to raise rates more because wages and core prices are still rising. If monthly increases continue slowing, the Fed will be able to back off rate increases in early 2023.


Labor Force Continues Shrinking 

December 7, 2022

labor force participation

The economy added 263,00 jobs in November. Expectations were for 200,000, so we exceeded them. But the labor force dropped another 186,000. That is bad, considering we have 4.3 million more job openings than workers to fill them.

Why it matters: We are now 102,000 workers below the pre-pandemic participation level. The labor force has shrunk for three straight months.

  • If we had the same participation rate now as pre-pandemic, there would be 3.3 million more workers in the labor force.

Be smart: Further complicating the strong topline jobs numbers is that the household survey showed the number of workers employed dropped by 138,000. Usually, the surveys of businesses (the 263,000 figure) and households are similar. No one is sure what to make of the surveys pointing in different directions. It is something to keep an eye on.

  • Also, wages rose 0.55% from October and 5.1% annually from November 2021. That is very strong.

Bottom line: The continuing strength of the labor market and wages is a Catch-22 for the Fed. Large wage gains as we are seeing are a sign that inflation remains high. It could mean continued interest rate hikes, which is why the financial markets reacted badly to what was mostly an encouraging jobs report.


Read more from the Chamber:

  • Economic Data: Comprehensive quantitative snapshots of business sectors and topics to help business and political leaders make informed decisions.
  • Workforce Data:Capturing the current state of the U.S. workforce.
  • Small Business Index: The MetLife & U.S. Chamber of Commerce Small Business Index is released on a quarterly basis and is compiled from 750 unique online interviews with small business owners and operators each quarter. The Index delivers a comprehensive quantitative snapshot of the small business sector as well as explores small business owners’ perspectives on the latest economic and business trends.
  • Middle Market Business Index:The survey panel consists of approximately 1,500 middle market executives and is designed to accurately reflect conditions in the middle market.

About the authors

Curtis Dubay

Curtis Dubay

Chief Economist, U.S Chamber of Commerce

Curtis Dubay is Chief Economist, Economic Policy Division at the U.S. Chamber of Commerce. He heads the Chamber’s research on the U.S. and global economies.

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