National Economy Snapshot

The National Economy

U.S. economic growth has slowed considerably, with real (inflation-adjusted) GDP growth coming in at 0.9% for 2022, compared with 5.7% in 2021. A contributor to this slowdown has been the Federal Reserve’s aggressive interest rate hikes, which occurred 7 times in 2022 and twice in 2023. The Fed has been raising rates in an effort to combat persistent high inflation, which has been challenging for businesses and consumers alike.

Inflation peaked in June 2022 at 9.1%, year-over-year, as measured by the Consumer Price Index. Since then, it has declined to 6.0% in February 2023, which, while an improvement, remains well above the Fed’s target inflation rate of 2%.

While inflation remains elevated, its downward trajectory, combined with the recent banking crisis, may give the Fed pause in making additional rate increases. Some analysts forecast the Fed may make one more quarter-point increase before leveling off, and hoping that the slowing economy and the previous interest rate increases are able to bring inflation closer to the target rate.

Economists forecast that while a shallow recession is a definite possibility, real GDP growth should still be modestly positive for 2023. Estimates range from 0.0% to 0.7% growth for 2023. Longer-term forecasts, while quite uncertain, project slowly rising economic growth for the U.S., with GDP growth coming in at 0.5-1.1% for 2024.

The labor market has remained remarkably tight, despite lackluster economic growth and high interest rates. Headline unemployment was at 3.6% in February, and the ratio of unemployed job seekers to job openings is only 0.5, meaning that there are roughly two open jobs for every job seeker in the economy. This makes hiring (and retaining employees) a significant challenge for employers in all sectors, including agriculture.