Curtis Dubay
Chief Economist, U.S Chamber of Commerce


March 31, 2023


Updated periodically, Economic Viewpoints provides a snapshot of the U.S. economy from the Economic Policy Division at the U.S. Chamber of Commerce.

Housing Rebounds

March 31, 2023

housing market stabilizing

The housing market is rebounding strongly. All major indicators were up in February.

Why it matters: The housing market boomed during Covid and then fell rapidly when the Federal Reserve started raising interest rates last year.

By the numbers:

  • The average rate on a 30-year fixed-rate mortgage rose from over 3% at the start of 2022 to under 7% now.
  • Prices were up over 20% on an annual basis as recently as last summer. They are now growing less than 4% on an annual basis.

For a time , other major housing indicators were down sharply too, including housing starts, building permits, existing home sales, new home sales, and pending home sales.

Be smart: We are still millions of housing units short of what is needed across the country. Demand outpacing supply will put a floor under how much prices will drop.

Bottom line: Expect the housing market to remain robust in the future and for as long as we lack sufficient supply.

Business Investment Growth Slows

March 29, 2023

durable goods down in january and february

Overall durable goods orders fell in February (1%) coming off a much steeper decline in January (5%). However, when you take out volatile spending on airplanes and defense spending, core capital investment by businesses grew 0.2%.

Why it matters: While this is mildly good news, and tempers the less-favorable large headline drop, business capital investment is barely treading water. In the last three months, combined growth has been small.

  • In January it grew 0.3%.
  • In December it fell 0.2%.

Be smart: The pullback in investment is understandable and expected. Interest rates are rising, making investment more expensive, and economic uncertainty is rising.

  • But: This data was from before the recent banking issues, which will likely cause lending to slow.

Bottom line: Business investment is unlikely to rebound strongly in March. That will put downward pressure on growth in the first quarter, which is otherwise shaping up to be strong.

Retail Sales Dip after Strong January

March 17, 2023

retail sales dip

Retail sales fell 0.4% in February, but this was after an incredible 3.2% gain in January. Retail sales are a subsection of total spending. It includes spending at retail stores (including online) and at bars and restaurants, but it doesn’t include services, business spending, or investment.

Why it matters: The decline may lead many to believe consumer strength is sapped. But based on last month’s data, consumers still can spend despite inflation, dwindling savings, and shrinking room on their credit cards.

And: Excluding volatile elements like auto sales and gas, retail sales were flat compared to January. Given the huge gain last month, this is heartening that consumers are still able to spend.

By the numbers:

  • Sales were up: Electronics and appliance stores (0.3%), food and beverage stores (0.5%), health and personal care stores (0.9%), general merchandise stores (0.5%), and non-store retailers (mostly online sellers) (1.6%).
  • Sales were down: Motor vehicles and parts dealers (1.8%), furniture stores (2.5%), building material and garden supply stores (0.1%), gas stations (0.6%), clothing and accessory stores (0.08%), sporting goods and hobby stores (0.05%), miscellaneous stores (1.8%), and food and drinking places (2.2%).

Be smart: Consumer strength has buoyed the economy since COVID. As long as the job market remains robust and incomes remain steady, consumers will have money to spend, even if they are falling slightly behind inflation. This could put a floor beneath spending and keep it stronger than in previous economic slowdowns.

Inflation Coming Down, but Slowly

March 15, 2023

The Consumer Price Index , the broadest measure of consumer prices, rose 6% annually in February. That is down from the peak of 9.1% in June 2022, but still very high. Inflation rose 0.4% from January to February.

Why it matters: This is a strong signal that we are not through with inflation yet.

By the numbers: Monthly data had been falling rapidly before the last few months.

  • Housing was the biggest driver in February. Prices for recreation, household furnishings and operations, and airline fares also rose.
  • Prices for used cars and trucks and for medical care decreased.
  • Core prices (all items less food and energy) rose 0.5% and are up 5.5% annually, which is high.
  • On an annual basis, prices of necessities like electricity (12.9%), food at home (10.1%), and housing (8.1%) rose; gas (2%) declined.

Bottom line: With the problems in the banking sector this week, there have been calls for the Fed to stop raising interest rates. But the strong February jobs report and this most recent inflation reading mean the Fed needs to keep raising rates to tame inflation.

J ob Openings Remain Extremely High

March 10, 2023

Job openings were 10.8 million at the end of January. While down 410,000 from December, openings are still extremely high.

Why it matters: There are 5.1 million more job openings than unemployed workers.

Be smart: Job openings are not dropping as fast as many anticipated because businesses still badly need many workers and because the economy is not cooling as quickly as expected.

  • Hiring and quits remained at the same level as in December. Businesses are still adding workers, and workers are still confident they can quit their current jobs and find better ones easily.

By the numbers: The labor market remains tight.

  • Job openings increased in transportation, warehousing, and utilities (94,000) and in nondurable goods manufacturing (50,000).
  • They decreased in construction (240,000), accommodation and food services (204,000), and finance and insurance (100,000).
  • The quits rate was 2.5% in January. That is below the all-time high rate of 3%.
  • 3.9 million people quit their jobs in January, down from the 4.45 million all-time high in March 2022, but still historically high.
  • Quits decreased in professional and business services (221,000), educational services (14,000), and federal government (5,000).

The Manufacturing and Service Sectors are Diverging

March 8, 2023

manufacturing sentiment

In February, the manufacturing sector was in contractionary territory for the 4th straight month (a reading below 50) according to the ISM survey on manufacturers. It was up slightly compared to January, breaking a streak of 3 consecutive monthly declines.

Why it matters: Manufacturing has been on a steady decline since it hit an all-time high in March 2021.

  • But: The service sector remains strong. It was at roughly the same level in February as in January. Optimism among service providers has declined since its all-time high in November 2021, but not as much as manufacturers' and remains well into growth territory (a reading above 50).
  • Services have grown in 32 of the last 33 months, the sharp decline came in December and has proved to be an aberration.

Be smart: The split between the sectors is explained by the recovery from Covid. Services were depressed during the pandemic and are still recovering.

  • Conversely, manufacturing boomed during Covid and has struggled since consumers switched back to spending on services and experiences.
  • Pre-Covid, this was much the same. Services were doing well and manufacturing struggled.

Bottom line: Expect this situation to remain for some time as the economy continues adjusting to the post-COVID normal.

Home Prices Decline for Sixth Straight Month

March 3, 2023

home prices still rising

Home prices have declined for six straight months every month from July 2022 through December 2022. In December they declined by 0.8% from November, the largest monthly decline since September.

Why it matters: Home prices are cooling because of higher interest rates. The average 30-year fixed-rate mortgage is now well over 6%. Up from over 3% at the start of 2022.

  • The Fed has been raising interest rates since March of 2022 to bring down high inflation.
  • The housing market is a major component of the economy and prices skyrocketed during COVID. Getting them down is a key part of taming inflation.

Be smart: Housing prices can still fall more before the drop becomes concerning. They are up almost 6% on an annual basis and had been up as much as 21% last summer.

  • More recent data shows the housing market may be improving. New home sales, pending sales, and permits all rose in January. Home builder optimism jumped up 20%.

Looking ahead: The built-up demand for housing and a lack of supply likely means that housing prices won’t fall (on an annual basis), which is good news for homeowners. The ease in price increases continues to be good news for buyers.

Durable Goods Orders Down, but Businesses Continue Investing

March 1, 2023

durable goods orders chart

Why it matters: Normally, a steep drop like that would be troubling. However, looking into the report more closely shows that volatile components account for the swings, and businesses continue to invest in capital.

Details: In December, orders for new airplanes surged. In January, those orders fell back. Airplanes are expensive, of course, so changes in orders cause big swings in the data.

  • But: Core capital goods spending, all durable orders minus volatile aircraft and defense spending, was up a solid 0.8%, which was above inflation for the month.

Be smart: This tells us that despite all the bumpiness in the economy, and while businesses continue to tell surveys they see an upcoming slowdown, they are forging ahead with all-important capital investment.

Bottom line: The economy is in better shape than most anticipated it would be. This means, if the slowdown everyone expects is to come this year, it may come later in the year rather than mid-year as most predicted.

Q4 GDP Revised Down Slightly

February 24, 2023

chances of mild recession chart

The economy grew 2.7% in the fourth quarter of 2022. Originally, the estimate was 2.9%. GDP numbers are revised twice, so we’ll get one more estimate for how the economy grew to close out last year.

Why it matters: While the economy is holding up well so far this year, many analysts still expect a mild recession in the middle of the year.

  • Yes but: The recent strength of consumer spending and the labor market has made projections more optimistic, either for a less-severe recession, or none at all.

Details: The minimal adjustment was because of spending wasn’t as high as originally estimated and imports were greater. Business investment, however, was stronger than previously thought.

  • The revisions did not change the annual growth rate for 2022, which remains at 2.1%.

Be smart: According to the Chamber’s analysis, growth in Q1 2023 is tracking slightly positively. The Atlanta Fed’s real-time tracker has the economy growing significantly more – 2.5% this quarter.

  • We’re only a bit more than halfway through the quarter though, so these estimates could change or converge.

What’s Happening with Interest Rates?

February 22, 2023

borrowing costs for businesses

The Federal Reserve raised its key interest rate again earlier this month. That was the eighth time it has done so in the last year, and a few more small hikes are likely coming with inflation still high and consumer spending and the job market still hot.

Why it matters: The Fed’s actions have translated into higher interest rates for consumers and businesses, but the increases in rates have tailed off.

  • For example, the average rate on a 30-year fixed mortgage peaked at over 7% in November. It has since stabilized at around 6.3%.
  • On the business side, the average rate for a AAA-rated corporate bond peaked at around 5.4% in October and has since settled at around 4.6%.

Big picture: The slight drop in rates from late 2022 and their stabilization since indicates that the markets originally overestimated how much the Fed would raise rates. The markets now believe the Fed won’t raise rates much more than it has.

  • This is good news for the housing market because, if it holds, it means the damage of higher mortgage rates is already in the rearview mirror.
  • For businesses, it means borrowing costs are likely to remain where they are. That will allow for better planning and an increase in long-term investing.

Read more from the Chamber:

  • Economic Data: Comprehensive quantitative snapshots of business sectors and topics to help business and political leaders make informed decisions.
  • Workforce Data: Capturing the current state of the U.S. workforce.
  • Small Business Index: The MetLife & U.S. Chamber of Commerce Small Business Index is released on a quarterly basis and is compiled from 750 unique online interviews with small business owners and operators each quarter. The Index delivers a comprehensive quantitative snapshot of the small business sector as well as explores small business owners’ perspectives on the latest economic and business trends.
  • Middle Market Business Index: The survey panel consists of approximately 1,500 middle market executives and is designed to accurately reflect conditions in the middle market.

About the authors

Curtis Dubay

Curtis Dubay

Chief Economist, U.S Chamber of Commerce

Curtis Dubay is Chief Economist, Economic Policy Division at the U.S. Chamber of Commerce. He heads the Chamber’s research on the U.S. and global economies.

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