Can the U.S. economy withstand the test of four overlapping risks?
David Harrison
A wider shutdown could curb auto production and push up car prices.
The U.S. economy has navigated some rapids this year, but now faces a convergence of multiple risks that could bring more turbulence to the economy.
The U.S. economy faces a host of risks this fall, including a wider bailout for auto workers, a prolonged government shutdown, the resumption of student loan payments and higher oil prices.
Each of these challenges would not be particularly damaging on its own. But if they combine, they could be more damaging, especially at a time when high interest rates are already cooling the U.S. economy.
“This quartet of risks could disrupt economic activity,” said Gregory Daco, chief economist at EY-Parthenon.
Many analysts expect the U.S. economy to slow this fall, but not to enter a recession. Daco predicts that the economy will slow sharply to an annualized rate of 0.6% in the fourth quarter from an estimated 3.5% in the third quarter. Goldman Sachs economists expect the economy to grow 1.3% in the fourth quarter from 3.1% in the third quarter.
So far in 2023, robust consumer spending and historically low unemployment have supported solid U.S. economic activity, even as the Federal Reserve has raised interest rates to a 22-year high to fight inflation by cooling the economy, while growth in Europe and China has slowed sharply.
One threat to the economy is a broader and longer strike by the United Auto Workers union against three Detroit automakers. Nearly 13,000 workers at three plants went on strike on Sept. 15. The strike will expand to 38 General Motors and Stellantis parts distribution centers in 20 states, UAW President Shawn Fain said Friday.
The limited strike is expected to have little initial impact, but a wider stoppage could curb vehicle production and push up car prices. Workers at auto parts suppliers could also lose their jobs.
According to Goldman Sachs, for every week a widespread strike lasts, annual economic growth will be reduced by 0.05-0.1 percentage points.
