The U.S. economy cooled only slightly at the end of last year, advancing at an annualized 2.9% rate, the Department of Commerce reported Thursday, even as forecasters are suggesting a recession is possible later in 2023.
The growth in the October-to-December quarter dropped from a 3.2% advance in the third quarter, following a half year when the world's biggest economy shrank.
For all of 2022, the economy grew by a solid, if unspectacular 2.1%, down from a robust 5.7% growth rate in 2021 when the recovery from the coronavirus pandemic was in full force.
Last year saw contrasting themes, including the fastest growth in consumer prices in four decades, pinching the wallets of Americans at all income levels.
Yet the lowest unemployment rate in 50 years was recorded, with hundreds of thousands of new jobs being added to payrolls every month. Separately, borrowing costs for businesses and consumer loans and home mortgages rose sharply as the country's central bank, the Federal Reserve, increased its benchmark interest rate seven times, an effort aimed at slowing economic growth and curbing inflation.
By the end of the year and into January, there were signs the economy was slowing, with some forecasters predicting a recession — meaning two straight quarters of economic decline in the coming months.
With higher interest rates, home buying and retail sales have dropped, while manufacturing output fell in November and December. The hiring of temporary workers is weakening, and major companies, especially in technology and media, are laying off thousands of workers.
While the inflation rate in consumer prices has dropped, it remains high by historical standards — now at a 6.5% annualized rate, well above the 2% rate sought by Federal Reserve policymakers. It is likely to stay high through much of 2023.
The Fed is also planning more interest rate increases, albeit not likely as big as the ones it imposed in 2022. It is another factor that could curtail U.S. economic growth.
The White House and the new Republican majority in the House of Representatives are facing contentious negotiations over increasing the limit on the national debt, now at $31.4 trillion. The U.S. could reach the spending limit by early June.
If an agreement is not reached, the ensuing turmoil would roil world financial markets and the U.S. government's credit rating could be cut, as occurred in 2011, the last time Congress and the White House quarreled significantly over increasing the debt limit.
"Economic growth is up stronger than experts expected at 2.9%," Biden said. Wages, the president added, "are up, and they're growing faster than inflation."
"I don't think it's unfair to say that this is all evidence that the Biden economic plan … is actually working," he said.
Biden said he would not negotiate with Republican opponents over raising the debt ceiling.
"I will not let anyone use the full faith and credit of the United States as a bargaining chip," Biden said. "We pay our debts."