WASHINGTON—The US economy expanded at a 2.9 percent 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 US 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 percent, matched a 53-year low. “Recent data suggest that the pace of expansion could slow sharply in as the effects of restrictive monetary policy take hold,” Rubeela Farooqi, chief US economist at High Frequency Economics, wrote in a research report. “From the Fed’s perspective, a desired slowdown in the economy will be welcome news.”
“That suggests higher rates were starting to take a bigger toll and sets the stage for weaker growth in the first quarter of this year,’’ said Andrew Hunter, senior US economist at Capital Economics. “The US economy isn’t falling off a cliff, but it is losing stamina and risks contracting early this year,’’ said Sal Guatieri, senior economist at BMO Capital Economics. “That should limit the Fed to just two more small rate increases in coming months.’’