Recession in the United States

The US Department of Labor confirms that 264,000 people applied for the statutory unemployment insurance benefit in the week ending on May 6, increasing dramatically by 22,000 claims from the previous week.

The figure exceeded all market forecasts, which had expected 242,000 claims in the most pessimistic outlook.

This variable is an indicator that anticipates the increase in the unemployment rate with a high level of certainty and reaches the highest level since October 2021.

Likewise, the number of people applying for unemployment insurance each week grew by more than 80,000 concerning the measurements of the last week of October last year.

Again, as of the second week of January 2023, there was a sharp acceleration in the number of applications, which continues to this day.

From the companies’ point of view, job vacancies in the labor market fell to the lowest level in the last two years.

Job vacancies fell back by 23% between July 2022 and March 2023.

While the unemployment rate returned to pre-pandemic levels, the same was not valid for the employment rate.

The number of people working was 60.4% at the end of April, still below the 61.1% observed in February 2020 (the last month before the pandemic).

Along with the sharp slowdown in the labor market, GDP expansion in the first quarter of 2023 showed an increase of only 1.1% compared to the previous period, when growth of 2.3% was expected.

IHS Markit forecasts suggest that GDP will only grow by 0.2% in the second quarter, and by the third quarter, a recession could begin to be observed.

Many analysts consider the next recession that could hit the United States one of the most “anticipated in history”.

Estimates published by Federal Reserve (Fed) economists assign a probability of recession already approaching 45%.

The economy faces two crises in a row: the incipient run on the banking system and the fiscal crisis on public finances.

The collapse of Silicon Valley generated a contagion effect on other giants such as Signature Bank and First Republic, as well as a strong run on the country’s main regional banks.

All this involves a significant fiscal cost for federal deposit insurance.

Moreover, President Joe Biden’s irresponsible fiscal policy led to a brutal increase in the fiscal deficit since August of last year, mainly explained by the student loan bailout.

The annual deficit is approaching US$2 trillion, and the government is forced to negotiate with the opposition to increase the legal ceiling of the public debt.

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