US markets: unseen recovery

Economists kept predicting recession, and the only hope seemed to be a distantly possible ‘soft landing’. Inflation hit new heights. The Federal Open Market Committee (often referred to as ‘the Fed’) steadily raised interest rates to contain it, with a long-term goal of 2% inflation. In February 2022, the federal funds effective interest rate was a mere 0.08%, having been slashed repeatedly to support the economy during the pandemic. Beginning in March 2022, the Fed began to raise rates, announcing seven rate increases in 2022 and five in 2023.¹

Millions of people felt the pinch of inflated prices for goods, fuel, and food. Fed bashing became nearly as popular as generic government bashing. Mistrust of institutions has become reflexive. It is difficult to see that the economy is finally improving, particularly since there are no rapid fixes and smooth curves in recovery. The American attention span is ill-suited when it comes to policies and programmes that take years to bear fruit. For example, inflation has been coming under control, but the latest data released in mid-February showed that inflation ratcheted up again in January. This caused renewed doubt and even a bit of panic – the Dow Jones Industrial Average dropped 500 points. The Fed takes a long view. Already in January 2024, the Fed announced that it would not begin reducing interest rates until more data becomes available, clearly understanding that the battle against inflation has not yet been won.

The US is the world’s largest oil market and the largest economy, and therefore has a massive impact on the global economy and oil market. Has it fully recovered from the pandemic? This article discusses the US economic recovery, the rise and gradual control of fuel prices, the impacts on demand, and the long-term outlook.

US economic recovery

The path to economic recovery has been slow since the COVID-19 pandemic. It has relied upon hundreds of measures affecting millions of people. Unfortunately, the loud divisiveness of US politics detracts from the successes being achieved. The Fed steadfastly worked on monetary policy. The Biden Administration adopted a multi-pronged approach of ‘investing in people’ to rebuild the economy from the ground up. Congress passed major laws providing relief to citizens, businesses, and state and local governments suffering from the COVID-19 pandemic. These initiatives have taken time, but they are working: unemployment is at historic lows, jobs are being created, wages have grown, inflation is cooling, productivity and GDP are rising, fuel demand has grown.

This article was originally published in the March 2024 issue of Hydrocarbon Engineering magazine. To read the full article, sign in or register for a free subscription.

Written by Nancy Yamaguchi, Contributing Editor.

Reference:¹https://www.federalreserve.gov/data.htm

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/15032024/us-markets-unseen-recovery/