Dimming Bright Spots in the U.S. Economic Landscape

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The U.S. economy faces several substantial threats, including inflation, deficit spending by Congress, and rising taxes. The inherent strength and resilience of the American economy and people are being stretched, but the following points remain a dimming bright spot in the U.S. economic landscape.

  • Housing starts are slowing due to rising prices and rising interest rates, but they remain above the 1.5 million unit starts rate that defines strength in this sector.
  • Consumer spending continues to grow, albeit at a slowing rate; inflation-adjusted spending is being fueled by credit card debt and depletion of savings as inflation takes a bigger bite out of household income.
  • Employment is growing at a moderate pace, gaining two million jobs year-to-date.
  • Interest rates, including mortgage rates, continue to rise, resulting in increases in the federal deficit, Federal Reserve discount rate increases, and inflation. Interest rates are anticipated to continue to rise in 2022 as the Federal Reserve raises the discount rate during the remainder of this year to curb rising inflation. Driving this inflation is demand-driven consumer consumption exacerbated by supply-chain disruptions, significant federal deficit spending, and regulation changes. In the end, interest rates are rising, but remain manageable given that the average mortgage rate is 5.9 percent and the prime rate in July was 5.25 percent.
  • Real non-residential investment in structures, a measure of the inflation-adjusted investment in total new non-residential construction, is rising and should continue strengthening after nine consecutive quarters of decline. Also, the American Institute of Architects (AIA) Billings Index rose to 54.4 in the second quarter of 2022 and this statistic portends growth for commercial building and renovation later in 2022.
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Factors threatening the U.S. economic situation include:

  • Inflation is rising, causing the dollar to decline, prices to rise (especially imports), personal income to fall, interest rates to soar greater than currently, and the economy may then slip into recession.
  • Federal government policies are imposing open borders and increasing government regulations that can impede economic growth and curtail company hirings while boosting labor costs.
  • Energy prices are rising as the federal government has canceled oil and gas drilling permits on federal land (be aware, having a lease does not allow drilling, but requires a permit for the lease before drilling can occur). Besides fuel and transportation, oil is a major raw material in pharmaceuticals, plastics, nylon, fertilizer, and many other products.
  • Continued undocumented immigrants and refugees entering the U.S. could threaten labor markets, expand welfare rolls and social costs, and raise government spending and debt while thwarting wage growth. Without wage growth, it will be hard to grow consumer spending, the primary driver of the U.S. economy.
  • Global trade disruptions could result from an escalation of the trade war with China, and the unintended result of sanctions on or by Russia for its invasion of Ukraine. Also, a widening conflict emanating from the Ukraine-Russia war could impact the global economy severely.
  • Remote working, given the large number of white-collar employees working remotely and largely unsupervised, could have an impact. It remains to be seen if worker productivity and innovation can be sustained, which is required to slow the growth of inflation.
  • Personal saving is falling dramatically, and consumer debt is rising significantly as households cope with rising prices and expenses due to inflation.
  • Doubling of the IRS, specifically the addition of 87,000 new IRS agents to review tax returns, will increase tax revenues and diminish personal income and investment.
  • Another wave of Coronavirus, or a variant or another easily transmitted virulent disease, could re-emerge, causing the re-imposition of restrictions and wreaking havoc on recovering economies.
  • The U.S. government deficit resulting from stimulus spending by the government could threaten U.S. economic stability, the dollar, international trade, and interest rates.

The major indicators thus far point to the U.S. economy slipping into recession late 2022 or early 2023 if current government policies are not changed.

Santo Torcivia is president of Market Insights LLC in Reading, Pennsylvania. He can be reached at 610.927.2299 or storcivia@marketinsightsllc.com.


This is a summary of the September 2022 Quarterly Market Monitor Report published by Market Insights LLC. NWFA members have exclusive access to the full report, which provides forecasts and analysis of economic, market, and industry conditions and trends affecting the North American flooring market. The report includes a historical and forecasted volume of dollar sales of total wood flooring (at mill sell price) per metro area and state. Separate reports are available for the United States and for Canada. The availability of the reports on a quarterly basis will provide NWFA members with current data that can help them develop business plans, prioritize inventory, and react to market conditions in a timely manner. NWFA members may download the full report by visiting nwfa.org.

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