and from the Walter Cronkite
school of journalism at Arizona
state university.
Judy: The U.S. Economy slowed
down over the first three months
of the year, the first time it
has contracted tents the
pandemic brought it to a
screeching halt.
Other troubling signs, most
notably inflation and concerns
over the rise of our wing costs.
Let's get some analysis on what
to make of this.
Diane swan joins us from grant
Thorton.
Welcome back to the "Newshour."
Last year, we saw roaring
growth.
First quarter this year, a slow
down what is behind this?
>> We saw a tale of two
economies.
The domestic economy, the
consumer helped by business
investment accelerated in the
first corridor off the fourth
quarter while the trade deficit
absolutely balloons.
Exports fell at their fastest
pace since the onset of the
pandemic in 2020.
As everything from the omicron
waved to the war in Ukraine and
new lockdowns in China take a
bigger toll on growth abroad and
at home.
We saw continued double-digit
gains and imports in the united
States as we were trying to
bring in and catch up on losses
from the delta wave last summer.
Where we saw the strength was
really the pillars of the U.S.
Economy, the consumer housing
market although all cash buyers
are pushing out first-time
buyers and business investment
accelerated.
That resilience we saw off of
1.7 million jobs generated
something like what we would do
in a year in the 2010s in one
corridor helped bu -- quarter
helped buoy the economy.
Government spending also fell
dramatically.
Defense spending was cut that we
know that will reverse course
soon also.
Judy: Which indicators do we
look to for the most accurate
picture of what is really going
on in the economy?
>> From the perspective of the
federal reserve, what matters
most is that inflation in the
data today as well hit a 40 year
high at the same time as
domestic demand accelerated.
That is important for the fed
because the resilience, as good
as it is also means it is
allowing inflation to continue
to flare and that is something
the fed is concerned about.
It would like to see demand slow
down to meet a supply
constrained local economy.
To do that you have to hammer
demand pretty hard and the
chances of getting things just
right like in goldilocks and in
getting the porridge just right
is not as easy as moving around
the table.
Goldilocks only exists in
fairytales.
Judy: You mentioned inflation,
or numbers are coming tomorrow.
We can look at chairman Jay
Powell and he said they may be
looking at a half point
increase.
How much is that supposed to
slow down the economy?
>> We are looking to see some of
the fastest rate increases since
1994 if not faster because in
addition to what would be two
back-to-back half percent
increases in may and June, we
will also see the fed reduce the
mammoth balance sheet it has.
That is an unknown.
It is kind of like driving using
the rearview mirror.
You cannot see the obstacles you
might pitch.
At could be the fastest
tightening cycle we have seen
since the 1980's to deal with
1980 level of inflation.
It is really hard.
We are worried the U.S. Economy
slows to a stalled speed in the
second half of the year where we
don't see the underlying
domestic demand and we start to
see a rise in the unemployment
Judy: And when you say slow
down, there is starting to be
discussion about the prospects
for another recession.
What are the signals we should
be looking at to see whether
that is on the horizon or not?
>> Really, the issue is whether
or not we can keep slowed down
the demand for workers.
It is up more than 60% since
February 2020 and the supply is
not up that much.
There is no way, even if we got
a lot more workers participating
in the labor force to get that
to meet the demand.
At the fed would like to do is
pool the job openings to bring
it down closer to supply.
It is over a 5 million gap right
now.
I'm worried we won't be able to
do that without raising the
unemployment rate and increasing
the supply of workers and I
think the probability of
recession is very high in the
second half of the year and as
we move into 2023.
We are forecasting a growth
recession which is when growth
is not enough to hold
unemployment down and it
continues to rise in 2020 32
derail the inflation we have and
get it back to being
insignificant to most consumers.
Judy: Many eyes in the meantime
are on the federal reserve and
what it does.
>> Absolutely, the federal
reserve will be driving this and
it is forcibly going to be
bringing inflation down.
They will be committing to that
again and doubling down on it
next week which is an important
message to watch.
How Progressive does the fed
want to continue to be after
this initial lift off which is
already going to be very
aggressive.
They have credibility on the
line.
They are behind the curve and
inflation.
Judy: Thank you, Diane.