WASHINGTON — The U.S. economy expanded at a 2.9% annual pace from October through December, ending 2022 with momentum despite the pressure of high interest rates and widespread fears of a looming recession.
The resilience of the U.S. job market has been a major surprise. Last year, employers added 4.5 million jobs, second only to the 6.7 million that were added in 2021 in government records going back to 1940. And last month’s unemployment rate, 3.5%, matched a 53-year low. Consumer spending, which fuels about 70% of the entire economy, rose at a sturdy 2.1% annual rate from October through December, down slightly from 2.3% in the previous quarter.
Economists at Bank of America expect growth to slow to a 1.5% annual rate in the January-March quarter and then to contract for the rest of the year — by a 0.5% rate in the second quarter, 2% in the third and 1.5% in the fourth. One additional threat to the economy this year is rooted in politics: House Republicans could refuse to raise the federal debt limit if the Biden administration rejects their demand for broad spending cuts. A failure to raise the borrowing cap would prevent the federal government from being able to pay all its obligations and could shatter its credit.