Why the U.S. Remains Far From Recession
The pandemic’s after effects fuel economic resilience despite rising interest rates
The pandemic’s after effects fuel economic resilience despite rising interest rates
More than a year after the Federal Reserve began rapidly raising interest rates to tame inflation, the hallmarks of a widely expected recession remain elusive.
Employers are hiring aggressively, consumers are spending freely, the stock market is rebounding and the housing market appears to be stabilising—the most recent evidence that the Fed’s efforts have yet to significantly weaken the economy.
Instead, the lingering effects of the pandemic have left consumers and employers still playing catch-up. That momentum could prove self-sustaining.
Americans are splurging on the activities they skipped during pandemic lockdowns, such as travel, concerts and dining out. Businesses are staffing up to satisfy the pent-up demand. Government policies in response to the pandemic—low interest rates and trillions of dollars in financial assistance—left consumers and businesses with lots of money and cheap debt. The same inflation that so worries the Fed translates into higher wages and profits, fuelling spending.
Many economists expect the Fed’s rate increases to cool the economy and price pressures over time, triggering a recession later this year. So far, however, the data keep coming in hotter than forecast.
Job gains, in particular, remain robust, pumping more money into Americans’ wallets. Payrolls grew by a surprisingly large 339,000 in May, and the increases for the preceding two months were higher than initially estimated, the Labor Department said Friday.
“I don’t think there’s any chance we’re in a recession,” said Justin Wolfers, professor of public policy and economics at the University of Michigan.
The National Bureau of Economic Research, an academic research group and the official arbiter of U.S. recessions, analyses a slew of economic data to help determine whether the economy is in a recession. Most of those indicators look healthy, Wolfers said.
Employers hiring last month included those in sectors such as healthcare, leisure and hospitality and government, which saw sharp job losses at the pandemic’s onset in spring 2020. State and local government—which includes public schools—and leisure and hospitality—a category that spans restaurants, hotels, entertainment and spectator sports—have yet to return to their pre pandemic employment levels amid continuing labor shortages.
Across the economy, job openings increased to 10.1 million in April from 9.7 million in March, far exceeding the 5.7 million unemployed Americans that month. The mismatch between job opportunities and job seekers continues to spur wage growth.
Average hourly earnings grew a solid 4.3% in May from a year earlier, similar to annual gains in March and April.
“I certainly did not think the labor market would remain this strong for this long,” said Carl Tannenbaum, chief economist for Northern Trust.
Courtney Wakefield-Smith is among those who have recently benefited from the strong labor market. The 33-year-old said she was promoted last year to an office job at a New Jersey water utility company. In her new role, she makes more than $25 an hour, well above her part-time jobs earlier in the pandemic that paid between $11 and $17 an hour.
Her higher wage and benefits including maternity leave are helping support her newborn son.
“This is my first child,” she said. “I don’t think I would have been able to afford a child before now to be completely honest.”
The job market could stay tight, largely because millions of former workers near retirement age have dropped out of the labor force since the pandemic began. The share of Americans age 16 and older working or seeking a job held steady last month at 62.6%.
Americans have about $500 billion in so-called excess savings—the amount above what would be expected had pre pandemic trends persisted, according to a May report from the Federal Reserve Bank of San Francisco.
That allows them to shell out for summer travel, concert tickets and cruises despite rising prices—and enabling companies to keep raising them.
Southwest Airlines Chief Executive Bob Jordan said recently the carrier sees strong demand in the next two to three months, the window during which most people book flights. American Airlines raised its projections for unit revenue in the second quarter, citing strong demand.
The number of people passing through U.S. airports during the Memorial Day weekend topped the pre pandemic figure from 2019, according to the Transportation Security Administration.
Brett Keller, CEO of travel site Priceline, a unit of Booking Holdings, said he has been surprised at the strength of travel demand when many consumers are paying more to book an airline ticket or reserve a hotel room.
Keller has seen examples for this summer, with round-trip fares from the East Coast to Boise, Idaho, exceeding $1,000, roughly double $500 a few years ago.
Economic activity and inflation haven’t slowed as much as Fed officials anticipated. Since March 2022, they have lifted the benchmark federal-funds rate from near zero to a range between 5% and 5.25%, a 16-year high.
Higher borrowing costs typically are felt first in rate-sensitive parts of the financial markets and economy, such as stocks and housing. The S&P 500, for example, fell about 25% from late December 2021 to last October as the Fed raised rates sharply. The broad index has since rallied about 20%, which wouldn’t typically happen if the economy were falling into recession.
Sales of existing and new homes fell sharply last year but have climbed since January. A shortage of homes for sale has helped drive home prices higher recently. Home builders are feeling more confident as a shortage of existing homes boosts demand for newly built residences. Residential and industrial construction firms added 25,000 jobs last month, up from a monthly average of 17,000 over the prior 12 months.
These signs of resilience suggest the Fed might need to raise interest rates further to push inflation down from its current rate around 5% toward the central bank’s 2% target.
Fed officials last week signalled an inclination to hold rates steady at their meeting this month. But Friday’s jobs report strengthened the likelihood that they would pair any such pause with a stronger preference to raise rates later this year.
“A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” Fed governor Philip Jefferson, said Wednesday. “Indeed, skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming.”
There are some signs higher rates are having an effect. Businesses slowed investment in the first quarter, cutting back on equipment spending particularly sharply.
The average workweek fell to 34.3 hours last month, the lowest since April 2020 and possibly reflecting that businesses are cutting hours instead of workers. The unemployment rate rose to 3.7% in May from 3.4% in April. The tech-heavy information sector cut 9,000 jobs in May.
Many economists and business executives say it is just a matter of time before interest-rate increases—which work with a lag—significantly sap the economy’s vigour.
Economists surveyed by The Wall Street Journal in April put the probability of a recession at some point in the next 12 months above 50%. But they have said that since October, and the recession appears no closer.
—Alison Sider and Chip Cutter contributed to this article.
Whether it’s a soft butter or a rich shade of mustard, the sunny shade is showing its versatility in interior design.
The cult Australian accessories label has added a playful new collectible to its SABRÉMOJI range, a miniature padlock charm crafted with purpose, personality, and polish.
Whether it’s a soft butter or a rich shade of mustard, the sunny shade is showing its versatility in interior design.
Art enthusiasts may wax poetic about yellow, one of the oldest hues in the history of art. The colour can be seen in some of the world’s most ancient works from Egypt and Rome, and pieces by Gauguin and Van Gogh reveal that these iconic painters were wild about yellow.
Although it may be the lightest hue on the basic colour wheel, yellow’s not the most timid. Sure, yellow can be soft and sweet, but it can also pack a punch. Designer Matthew Boland of MMB Design in Scottsdale, Arizona, praises the hue’s power in interiors.
“Yellow can be soothing or electric; it is a very versatile colour,” Boland said. “The warmth of yellow and the flexibility of yellow make it extremely appealing to all.”
Mansion Global asked Boland and three other interior designers to share suggestions on decorating with the myriad moods of yellow, one of home décor’s hottest colours in 2025.
“Butter yellow is a beautiful soft colour that doesn’t read feminine, which is why you are seeing it pop up on the men’s and women’s runways. It is a colour that is beautiful with all skin tones and reads neutral when paired with other colours. It is warm and inviting while being whisper quiet. undefined undefined “I love red and butter yellow, they are both warm tones and they pair well together. I also like cobalt blue and a great bright green. Turquoise is also extremely complimentary.
“I love yellow drapery, it catches and reflects light beautifully. I love it for outdoor upholstery as it looks amazing with green plants and grass, and I love it in lacquered furnishings because it changes with the light during the day.”
—Matthew Boland, MMB Studio in Scottsdale, Arizona
“From butter yellow to citron and canary to goldenrod, this optimistic and cheerful hue lends itself well to interiors and fashion as it ignites a smile and happy mood. The bright yellow in this classic check pattern [pictured] with a white background adds charm to the room.
“Consider adding a pair of yellow velvet pillows to your sofa; a bright yellow throw over your favourite chair, or maybe even just a large bouquet of yellow flowers for your coffee table. (Or try) painting a bathroom cabinet and trim for a fun refresh.”
—Designer Maggie Griffin in Gainesville, Georgia
Yellow can be used as an accent colour in just about any single piece of furniture or accessory, or as the focal shade in a space.
“If you use yellow throughout a space or on large surfaces, keep the other colours in the room on the neutral side. It can be difficult to add other shades of yellow or introduce another colour into the space, so keep other furnishings and accessories neutral, allowing the yellow to be the focal point.
“In this room, yellow is the primary colour of the wallpaper, evoking warmth and calm. This yellow wallpaper also reflects natural light, making the room brighter. [Yellow] enhances vintage spaces, such as this older, historic residence, but can also be used in more contemporary designs.
“Grey and white are the primary accent colours because they are subtle, allowing the yellow to shine. But other neutrals, such as black or navy, look beautiful with yellow as well and act as a secondary colour that enhances the yellow tones without taking away from it.”
—Designer Kelley Proxmire in Bethesda, Maryland
“I love using yellow in rooms that need to echo positive energy–– everything from kitchens, laundry and mudrooms, to kid bedrooms and playrooms. Yellow belongs everywhere.
“Pairing yellow with too many bright colours versus balancing it out can make it too loud or overbearing. Use colour theory to ensure balance and harmony with your selections in a space. Examples of this include pairing yellow with its complementary colour, blue (complementary colours are any two colours that are directly opposite each other on the colour wheel) or its analogous colour, orange or green (analogous colours are located next to each other on the colour wheel). Pairing yellow with a colour like red would be more harsh and not as compatible.
“I used this colour, Sherwin-Williams Tassel, in this guest bedroom [pictured] to create a colour-drenched, beautiful oasis that feels like a boutique hotel. We balanced out the bright colours with neutral furnishings and bedding, and bolder colours on the upholstered bed, rug and artwork.”
—Amber Guyton, Blessed Little Bungalow in Atlanta
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