The U.S. economy got an unusually blunt endorsement from an unexpected source Wednesday: Federal Reserve Chair Jerome Powell.
“This is a good situation. Let’s be honest. This is a good economy,” Powell told reporters Wednesday after the conclusion of a central bank meeting on setting interest rates.
Powell’s praise is likely to be welcomed by the White House as it puts renewed effort into talking up the economy, which remains a weak point for President Joe Biden politically.
Almost all major economic indicators have turned upward in recent months and inflation, the economy’s most visible Achilles’ heel, has even taken a turn for the better. But polls show that the public is only beginning to come around to the idea that the economy is in good shape, with Republicans in particular convinced that it is bad.
An Economist/YouGov poll, conducted from Sunday to Tuesday, found that 42% of respondents approved of Biden’s handling of the economy, compared with 50% who disapproved. By party, though, 78% of Democrats approved, while 83% of Republicans disapproved.
Powell, in his remarks, focused on the economy’s strengths when asked how he would describe it.
“The executive summary would be that growth is solid to strong over the course of last year,” Powell said.
“The labor market, 3.7% unemployment, indicates that the labor market is strong. We’ve had just about two years now of unemployment under 4%. That hasn’t happened in 50 years. So it’s a good labor market. And we’ve seen inflation come down.”
The economy grew at a solid pace of 3.3% in the final three months of 2023 and 2.5% for the year as a whole — an astonishing result considering the near-unanimity among economists as 2023 began that a recession was inevitable. In December, the unemployment rate was 3.7% and the economy gained 216,000 jobs. Inflation, the rate at which prices increase, grew at a 0.3% pace in the month.
There are signs that voters are beginning to brighten up about the economy. A survey of consumer sentiment earlier this month showed it at the highest level since July 2021. That finding was echoed Tuesday by a similar but separate survey of consumer confidence, which rose to its highest level since December 2021.
In a formal statement, the Fed committee that sets interest rates said it would likely not lower them until it was assured that inflation was nearing the central bank’s 2% target. That threw cold water on hopes in the stock market that rate cuts could come as early as March, and stock prices fell after the news.
Powell himself warned against complacency and said that risks remain, including a slowing job market.
“We do expect growth to moderate,” he said. “Of course, we have expected it for some time, and it hasn’t happened.”