Chronic. If the fall is hot for Joe Biden, struggling to pass his social and infrastructure plans, known under the generic name of “Build Back Better”, winter promises to be freezing. The US economy could slow down sharply, right around the time of the midterm elections. No one talks about a recession, but the clouds are gathering on the horizon. Admittedly, in appearance, all is well: the Federal Reserve forecasts a growth of 3.8% in 2022. But this figure is misleading, as economist Patrick Artus explains, because it is an annual comparison that takes into account the beginning of 2021, when the gross domestic product (GDP) was very low, Covid-19 obliges. The rate of growth could fall back to around a very disappointing 2%, and an accident cannot be ruled out either.
The first shock will first be budgetary. 2020 and 2021 will have been the roaring twenties, with budget deficits exceeding $ 3,100 billion (€ 2,668 billion), or 14.9% of GDP, and $ 3,000 billion (or 13.4% of GDP, for the years ended in September. These should be halved in 2022, according to the White House, or even by nearly three, according to independent forecasts of Congress (1,150 billion, or “only” 4.7% of GDP). Logically, this reduction in federal spending and subsidies, even if it is mitigated by Joe Biden’s social and infrastructure plans, which represent around 2% of GDP per year, will have a heavy effect on the economy. Add to this the economic slowdown in China and the confused feeling that a crash is likely to happen in financial markets, especially if inflation crushes corporate profits in the third quarter.
Americans must spend
Who can save the year 2022? All eyes are on American households, who have received dollars tossed from the sky and saved them for lack of being able to spend them during the pandemic. These were on the one hand placed on the stock market, which soared, and on the other hand placed in single-family homes, the price of which rose at the end of June by 18.6% over one year. So Americans have to spend, but that’s easier said than done, although recent numbers are encouraging after the Delta variant hit back in August. But we do not make up for a canceled trip, missed restaurants and a car kept for another year.
To achieve this result, Americans must return to secure work. Of course, the economy has recreated 17 million of the 22 million jobs destroyed, but 5 million are still missing at the end of August. To this is added inflation, above 5% over one year, which is dragging down wages, which increased only by 4.2%. As a result, after a surge in real purchasing power in times of Covid, Americans will find themselves less comfortable and their consumption more uncertain.
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