From
George Castro
International analyst
The US economy beat all expectations and grew 2.9% annually in the fourth quarter of 2022, despite rising interest rates of the Federal Funds by 0.75 percentage point achieved by the Federal Reserve on three consecutive occasions to face a record inflation which rose to 10.5% per annum in October of last year.
Despite their high level, the fourth quarter data resulted in a setback compared to the 3.2% increase recorded in the previous quarterwith the addition that in this period there was the record creation of over 400,000 jobs, mainly in the service sector.
The key strategic insight into the US economic situation is that underlying domestic demand as revealed by final sales to domestic consumers (excluding government spending) it increased by only 0.2%, while in the previous quarter it had grown by 1.1%..
At the same time this was accompanied by a real collapse of fixed rate investment which decreased by 6.7% annually, while spending on the construction sector decreased by 26.7% annually at that stage.
That is why the North American product, the first in the world (26.4 trillion US dollars/25% of world GDP), it increased by just 1% in 2022, in contrast with the significant increase of 5.7% of the previous year; and now everything indicates that it is facing a recessionary situation in the second and third quarters of this year.
This is it it has resulted in drastic cost cutting in all companies Americans, manufacturing and services, which has acquired paroxysmal characteristics in the driving sector of the world’s largest economy, which are the high-tech companies led by the global platforms of Amazon, Microsoft, Google and Facebook.
The surprising thing is that this happens when the unemployment rate is still at 3.5%, the lowest in the last 60 yearsand job creation capacity is on the order of an average of 400,000 jobs quarterly.
Meta, the new name Mark Zuckerberg gave to his Facebook, Instagram and WhatsApp holding company, has laid off 13,000 highly skilled workers in the past two weeks, representing 13% of its global workforce.
Elon Musk went even further, completing his Twitter dominance by cutting half of his workforce (3,100 workers). Finally, Amazon owner Jeff Bezos fired 10,000 of his core staff.
The Federal Reserve estimates that exceptional US job creation, especially in the services sector, is the main cause of high inflationand this is what forces wages to rise above the price increase to address the lack of sufficiently skilled workers, which constitutes a vicious circle that notoriously tends to feed itself.
This is accompanied by a significant reduction of a structural nature in the workforcewhich has lost around 3 million workers since 2019, according to Deutsche Bank, adding that more than 2/3 of that decline is due to demographic factors, primarily an aging population.
If it is added the decline registered by regular immigrationwhich has decreased by more than 30% in the last 10 years, the reduction in the workforce amounts to more than 7 million workers.
This of course contrasts with the wave of illegal immigration that the US is living through its southern border, practically open during the Biden government, and that in 2022 alone exceeded 2.5 million people from all over the world, and in particular from Central America and the Caribbean, eager to share the “American dream” of an economy that has only 3.5% unemployment and grew by 5.7% in 2021.
All indications are that the aging of the population, with its consequent withdrawal from the workforce, is the crucial factor behind the persistently high rate of inflation in the United States.
It should be noted that what characterizes population aging is that by definition increases demand and reduces supplyunlike 18-29 year olds who do the exact opposite, and therefore are a disinflationary force, as was particularly the case with the early post-war “Baby Boomers”, and who have now clearly outlived their relevance due to the inexorable weight of biology, whose laws are impossible to avoid.
This is the framework with which the US faces the electoral process of 2024, in which the leadership of the White House is at stake, which is currently experimenting with the mandate of Joe Biden a situation of extreme weaknessin which the Republicans who control the House of Representatives are on the offensive against the president.
He The US power system is a shared powerand both the Executive and Congress, especially the lower house, are constituent members of the system of government.
This is how the first power in the world is governed in the 21st century, in a country where the national consensus has practically disappeared.
Source: Clarin
