Category: Economy

Private payroll growth held strong in October while worker pay rose as well, particularly in the leisure and hospitality industry, according to a report Wednesday from payroll processing firm ADP.

Companies added 239,000 positions for the month, ahead of the Dow Jones estimate of 195,000 and better than the downwardly revised 192,000 in September. Wages increased 7.7% on an annual basis, down 0.1 percentage point from the previous month.

Job gains were especially strong in the pivotal leisure and hospitality sector, which added 210,000 positions while wage growth accelerated 11.2%. The industry, which includes hotels, restaurants, bars and related businesses, is seen as a bellwether as it took the hardest Covid hit and is still below pre-pandemic levels.

All the job growth came from services-related industries, which added 247,000 jobs, while goods-producing sectors lost 8,000 jobs, due largely to a loss of 20,000 manufacturing positions. Trade, transportation and utilities rose by 84,000.

“This is a really strong number given the maturity of the economic recovery but the hiring was not broad-based,” ADP’s chief economist, Nela Richardson, said. “Goods producers, which are sensitive to interest rates, are pulling back, and job changers are commanding smaller pay gains. While we’re seeing early signs of Fed-driven demand destruction, it’s affecting only certain sectors of the labor market.”

The Federal Reserve has been raising interest rates in an effort to cool inflation running near its highest level in more than 40 years. One primary aim is the historically tight labor market, where job openings outnumber available workers by a nearly 2-to-1 margin.

While the headline ADP number was strong, the details looked weaker.

Along with the decline in construction jobs, information (-17,000), professional and business services (-14,000) and financial activities (-10,000) also showed losses.

By business size, companies with between 50 and 249 employees had virtually all the gains, adding 241,000.

The ADP report comes two days before the more closely watched nonfarm payrolls count from the Bureau of Labor Statistics. That report is expected to show growth of 205,000, from September’s 263,000.

Job openings surged in September despite Federal Reserve efforts aimed at loosening up a historically tight labor market that has helped feed the highest inflation readings in four decades.

Employment openings for the month totaled 10.72 million, well above the FactSet estimate for 9.85 million, according to data Tuesday from the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey.

The total eclipsed August’s upwardly revised level by nearly half a million.

Fed policymakers watch the JOLTS report closely for clues about the labor market. The latest numbers are unlikely to sway central bank officials from approving what likely will be a fourth consecutive 0.75 percentage point interest rate increase this week.

September’s data indicates that there are 1.9 job openings for every available worker. The disparity in supply and demand has helped fuel a wage increase in which the employment cost index, another closely watched data point for the Fed, is growing at about a 5% annual pace.

In other economic news Tuesday, the ISM manufacturing index posted a 50.2 reading, representing the percent of companies reporting expansion for October. That was slightly better than the Dow Jones estimate for 50.0 but 0.9 percentage point lower than September.

One good piece of news from the ISM data: The prices index fell another 5.1 points to a 46.6 reading, indicating a lessening of inflation pressures. Order backlogs also declined, dropping 5.6 points to a 45.3 reading, while supplier deliveries fell 5.6 points to 46.8 and employment edged higher to 50.

Hiring numbers have stayed solid, though they are slowing.

Friday’s nonfarm payrolls report for October is expected to show growth of another 205,000, which while strong by historical levels would represent a further deceleration after averaging gains of 444,000 for the first half of 2022 but 372,000 over the past three months.

Hiring declined by 252,000 in September, while quits edged lower. Total separations showed a sharp decline, falling by nearly 400,000 to a rate of 3.7% as a share of the labor force, down from 4% in August.

Respondents to the ISM survey indicated various pressures continuing, while abating in other areas.

“Challenges with labor and parts delivery are easing. Order levels are slowing down after pent-up demand in the previous month,” said one respondent in the transportation equipment industry.

Another, in the food, beverage and tobacco sector, noted that the “growing threat of recession is making many customers slow orders substantially. Additionally, global uncertainty about the Russia-Ukraine (war) is influencing global commodity markets.”

The Fed releases its rate decision Wednesday at 2 p.m. ET. Markets are pricing in a nearly 90% chance of a 0.75 percentage point increase, while narrowly expecting another 0.5 percentage point move in December, according to CME Group data.

U.S. consumer spending is experiencing a “mitigation of growth” but not a slowdown, Bank of America CEO Brian Moynihan said Friday.

Interest rate hikes by the Federal Reserve are starting to be felt in the housing and auto markets, and renters will see their budgets squeezed as landlords pass on higher costs, he told CNBC’s “Squawk Box Europe.” But he stressed that consumer spending remains strong.

“If you raise rates and slow down the economy to fight inflation, the expectation is you have a slowdown in consumer spending. It hasn’t happened yet. So it could happen, but it hasn’t happened yet,” Moynihan said.

“You’re seeing a mitigation of the rate of growth, not a slowdown. Not negative growth.”

Bank of America expects the Fed to hike rates by 75 basis points and 50 basis points at its two remaining meetings this year, followed by two 25 basis point increases next year. One basis point equals 0.01%.

That will take the funds rate to around 5% and the Fed can then “let it work,” Moynihan said.

The current rate of 3%-3.25% is the highest it’s been since early 2008 and follows three 75 basis point rises in a bid to combat inflation, which was running at 8.2% on an annual basis in September.

Economists, politicians and business leaders are split on whether the U.S. economy is heading for a recession or is already in one. U.S. gross domestic product grew for the first time this year in the third quarter, expanding at a higher-than-expected 2.6% annually.

JPMorgan boss Jamie Dimon told CNBC he expects a recession in six to nine months given quantitative tightening and the unknown impact of Russia’s war in Ukraine.

But for now, consumers still have strong credit, unemployment is low, wage growth is strong and corporations are in good shape with strong underlying credit — even if growth and earnings are slowing, Moynihan said. However he did concede there were risks from unforeseen events with “low probability and high impact.”

“You don’t see those risks evidencing in behavior change of companies and consumers yet. People aren’t laying off massive amounts of people, they’re not hiring as many,” he said.

Asked whether the corporate credit market was flashing any warning signs, Moynihan said, “I would not confuse credit risk with pricing risk.”

“Growth and earnings may be slowing down, again because the economy recovered very fast and had major growth that flattens out a little bit. If you see negative GDP prints, of course corporate earnings might slow down,” he added.

“But on the other hand they’re still making money, the margins are still holding … the underlying credit, the underlying structure of the credit, the underlying credit quality is very strong.”

Moynihan said Europe could see a recession early to mid next year before “coming back out the other side,” with the war in Ukraine and energy crisis risks on the horizon.

“But right now you don’t see the conditions because the employment’s strong, the underlying activity’s strong, the amount of stimulus that was put in is still in the markets that people don’t see it as a deep recession.”

He added: “The energy question is much different than the U.S. The good news is the U.S. is a big economy, if we can get the energy to Europe, for the people to heat their homes and industry to run, that would be a good thing. And I know all the companies are working on it, because I talk to them about it.”

Clarification: This article has been updated to clarify that Brian Moynihan was discussing growth in U.S. consumer spending.

An economic gauge that the Federal Reserve follows closely showed that inflation stayed strong in September but mostly within expectations, the Bureau of Economic Analysis reported Friday.

The core personal consumption expenditures price index increased 0.5% from the previous month and accelerated 5.1% over the past 12 months, the report showed. The monthly gain was in line with Dow Jones estimates, while the annual increase was slightly below the 5.2% forecast.

Including food and energy, PCE inflation rose 0.3% for the month and 6.2% on a yearly basis, the same as in August.

The report comes as the Fed is prepared to enact its sixth interest rate increase of the year at its policy meeting next week. In an effort to combat inflation running at its fastest pace in nearly 40 years, the Fed has been raising rates, with increases totaling 3 percentage points thus far.

Markets widely expect the Fed to enact its fourth straight 0.75 percentage point increase at the meeting, but possibly slow down the pace of hikes after that.

The BEA also reported that personal income increased 0.4% in September, one-tenth of a percentage point above the estimate. Spending as gauged through personal consumption expenditures increased 0.6%, more than the 0.4% estimate.

However, when adjusted for inflation, spending rose just 0.3%. Disposable personal income, or what is left after taxes and other charges, rose 0.4% on the month but was flat on an inflation-adjusted basis.

The personal saving rate, which measures savings as a share of disposable income, was 3.1% for the month, down from 3.4% in August.

A separate release Friday showed that employment costs rose 1.2% for the third quarter, in line with estimates, according to the Bureau of Labor Statistics. On an annual basis, the employment cost index increased 5%, slightly lower than the 5.1% pace in the second quarter.

Fed officials watch Friday’s data points closely for clues about where costs are headed, particularly with a tight labor market in which there are 1.7 jobs per every available worker, according to recent BLS data.

The Fed prefers the PCE price reading to the more widely followed consumer price index from the BLS. The BEA measure adjusts for consumer behavior, in particular substitution of less expensive goods, to determine cost-of-living increases rather than simple price moves.

Markets think the Fed might downshift the pace of its rate hikes ahead. Futures pricing Friday morning indicated a nearly 60% chance that the central bank will increase rates 0.5 percentage point in December.

Correction: A separate release Friday showed that employment costs rose 1.2% for the third quarter, according to the Bureau of Labor Statistics. An earlier version misstated the day.

The U.S. economy posted its first period of positive growth for 2022 in the third quarter, at least temporarily easing recession fears, the Bureau of Economic Analysis reported Thursday.

GDP, a sum of all the goods and services produced from July through September, increased at a 2.6% annualized pace for the period, according to the advance estimate. That was above against the Dow Jones forecast for 2.3%.

That reading follows consecutive negative quarters to start the year, meeting a commonly accepted definition of recession, though the National Bureau of Economic Research is generally considered the arbiter of downturns and expansions.

The growth came in large part due to a narrowing trade deficit, which economists expected and consider to be a one-off occurrence that won’t be repeated in future quarters.

GDP gains also came from increases in consumer spending, nonresidential fixed investment and government spending. The report reflected an ongoing shift to services spending over goods, with spending on the former increasing 2.8% while goods spending dropped 1.2%.

Declines in residential fixed investment and private inventories offset the gains, the BEA said.

“Overall, while the 2.6% rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained,” wrote Paul Ashworth, chief North America economist at Capital Economics. “Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates. We expect the economy to enter a mild recession in the first half of next year.”

Markets were higher following the release, with the Dow Jones Industrial Average gaining more than 300 points in early trading on Wall Street.

In other economic news Thursday, weekly jobless claims edged higher to 217,000 but were still below the 220,000 estimate. Also, orders for long-lasting goods increased 0.4% in September from the previous month, below the 0.7% expectation.

The report comes as policymakers fight a pitched battle against inflation, which is running around its highest levels in more than 40 years. Price surges have come due a number of factors, many related to the Covid pandemic but also pushed by unprecedented fiscal and monetary stimulus that is still working its way through the financial system.

The underlying picture from the BEA report showed an economy slowing in key areas, particularly the consumer and private investment.

Consumer spending as measured through personal consumption expenditures increased at just a 1.4% pace in the quarter, down from 2% in Q2. Gross private domestic investment fell 8.5%, continuing a trend after falling 14.1% in the second quarter. Residential investment, a gauge of homebuilding, tumbled 26.4% after falling 17.8% in Q2, reflecting a sharp slowdown in the real estate market.

On the plus side, exports, which add to GDP, rose 14.4% while imports, which subtract, dropped 6.9%. Net exports of goods and services added 2.77 percentage points to the headline total, meaning GDP essentially would have been flat otherwise.

There was some good news on the inflation front.

The chain-weighted price index, a cost-of-living measure that adjusts for consumer behavior, rose 4.1% for the quarter, well below the Dow Jones estimate for a 5.3% gain, due in large part to falling energy prices. Also, the personal consumption expenditures price index, a key inflation measure for the Federal Reserve, increased 4.2%, down sharply from 7.3% in the prior quarter. Core prices, excluding food and energy, increased 4.5%, about in line with Wall Street expectations.

Earlier this year, the Fed began a campaign of interest rate hikes aimed at taming inflation. Since March, the central bank has raised its benchmark borrowing rate by 3 percentage points, taking it to its highest level since just before the worst of the financial crisis.

Those increases are aimed at slowing the flow of money through the economy and taming a jobs market where openings outnumber available workers by nearly 2 to 1, a situation that has driven up wages and contributed to a wage-price spiral that economists fear will tip the U.S. into recession.

“Our concerns about going into recession would not necessarily be from any of this data. It comes more from how much the Fed cranks up rates and what happens when firms and consumers respond to this,” said Luke Tilley, chief economist at Wilmington Trust.

“The most encouraging thing is you still have consumer spending, you still have job growth and wage growth and that should help on the consumer spending side,” he added. “What we would be most concerned about would be a sharp pullback by businesses in their hiring.”

The Fed is widely accepted to approve a fourth consecutive 0.75 percentage point interest rate hike at its meeting next week, but then might slow the pace of increases afterward as officials take time to assess the impact of policy on economic conditions.

“The Fed will continue to err on the side of overtightening, which is reasonable given the desire to mitigate the risk of inflation becoming entrenched at high levels,” said Preston Caldwell, head of U.S. economics for Morningstar. “After December, we’re likely to see the pace of tightening slow quite dramatically.”

Policymakers will get another, more current look at inflation data when the BEA releases a report Friday that will include personal consumption expenditures prices for September. That measure is expected to show that core prices excluding food and energy rose 5.2% from a year ago and 0.5% on a monthly basis.

Political questioning of Federal Reserve Chair Jerome Powell about the central bank’s policy moves is intensifying, this time from the other side of the aisle.

No stranger to political pressure, the Fed chief this week found himself the focus of concern in a letter from Sen. Sherrod Brown. The Ohio Democrat warned in the letter about potential job losses from the Fed’s rate hikes that it is using to combat inflation.

“It is your job to combat inflation, but at the same time you must not lose sight of your responsibility to ensure that we have full employment,” Brown wrote. He added that “potential job losses brought about by monetary over-tightening will only worsen these matters for the working class.”

The letter comes with the Fed less than a week away from its two-day policy meeting that is widely expected to conclude Nov. 2 with a fourth consecutive 0.75 percentage point interest rate increase. That would take the central bank’s benchmark funds rate to a range of 3.75% to 4%, its highest level since early 2008 and represents the fastest pace of policy tightening since the early 1980s.

Without recommending a specific course of action, Brown asked Powell to remember the Fed has a two-pronged mandate — low inflation as well as full employment — and requested that “the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate.”

The last time the Fed raised interest rates, from 2016 to December 2018, Powell faced withering criticism from former President Donald Trump, who on one occasion called the central bankers “boneheads” and seemed to compare Powell unfavorably with Chinese President Xi Jinping when he asked in a tweet, “Who is our bigger enemy?”

Democrats, including then-presidential hopeful Joe Biden, criticized Trump for his Fed comments, insisting the central bank be free of political pressure when formulating monetary policy.

Brown’s stance was considerably more nuanced than Trump’s — though equally unlikely to move the dial on monetary policy.

“Chair Powell has made it pretty clear that the necessary conditions for the Fed to achieve its full employment objective is low and stable inflation. Without low and stable inflation, there’s no way to achieve full employment,” said Mark Zandi, chief economist for Moody’s Analytics. “He’ll stick to his guns on this. I don’t see this as having any material impact on decision making at the Fed.”

To be sure, while it’s most likely a reaction to a changing tone from some Fed officials and a slight shift in the economic data, market expectations for monetary policy have altered a bit.

Traders have made peace with the three-quarter point hike next week. But they now see just a 36% chance for another such move at December’s Federal Open Market Committee meeting, after earlier rating it a near 80% probability, according to CME Group data.

That change in sentiment has come following cautionary remarks about overly aggressive policies from several Fed officials, including Vice Chairman Lael Brainard and San Francisco regional President Mary Daly. In remarks late last week, Daly said she’s looking for a “step-down” point where the Fed can slow the pace of its rate moves.

“The democratization of the Fed is the issue for the market, how much power the other members have versus the chairman. It’s difficult to know,” said Quincy Krosby, chief equity strategist at LPL Financial. Regarding Brown’s letter, Krosby said, “I don’t think it’s going to affect him. … It’s not the pressure coming from the politicians, which is to be expected.”

A Fed spokesman acknowledged that Powell received the Brown letter and said normal policy is to respond to such communication directly. In the past, Powell has been generally dismissive when asked if political pressure can factor into decision making.

Along with the nudging from Brown, Powell also has faced criticism from others on Capitol Hill.

Sen. Elizabeth Warren, the ultra-progressive Massachusetts Democrat and former presidential contender, has called Powell dangerous and recently also warned about the impact rate hikes could have on employment. Also, Sen. Joe Manchin, D-W. Va., last year criticized Powell for what was seen as the Fed’s flat-footed response to the early rise of inflation.

“I don’t necessarily think that Powell will buckle to the political pressure, but I’m wondering whether some of his colleagues start to, some of the doves who have become hawkish,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Employment’s fine now, but as months go on and growth continues to slow and layoffs begin to increase at a more notable pace, I have to believe that the level of pressure is going to grow.”

Payroll gains have been strong all years, but a number of companies have said they are either putting a freeze on hiring or cutting back as economic conditions soften. A slowing economy and stubbornly high inflation is making the backdrop difficult for the November elections, where Democrats are expected to lose control of the House and possibly the Senate.

With the high stakes in mind, both markets and lawmakers will be listening closely to Powell’s post-meeting news conference next Wednesday, which will come six days before the election.

“He knows the pressure. He knows that the politicians are increasingly nervous about losing their seats,” Krosby said. “There’s very little he could do at this point, by the way, to help either party.”

Goldman Sachs CEO David Solomon and JPMorgan CEO Jamie Dimon both expect a U.S. recession as a tight labor market keeps the Federal Reserve on an aggressive monetary policy tightening trajectory.

Speaking on a panel at the Future Initiative Investment conference in Riyadh, Saudi Arabia on Tuesday, Solomon said he expects economic conditions to “tighten meaningfully from here,” and predicted that the Fed would continue raising interest rates until they reached 4.5%-4.75% before pausing.

“But if they don’t see real changes — labor is still very, very tight, they are obviously just playing with the demand side by tightening — but if they don’t see real changes in behavior, my guess is they will go further,” he said.

“And I think generally when you find yourself in an economic scenario like this where inflation is embedded, it is very hard to get out of it without a real economic slowdown.”

The Fed funds rate is currently targeted between 3%-3.25%, but Federal Open Market Committee policymakers have signaled that further hikes will be needed, with U.S. inflation still running at an annual 8.2% in September.

Philadelphia Fed President Patrick Harker said last week that the central bank’s policy tightening to date had resulted in a “frankly disappointing lack of progress on curtailing inflation,” projecting that rates would need to rise “well above 4%” by the end of the year.

Meanwhile, the U.S. Department of Labor reported 10.1 million job openings in August, signaling that employers’ demand for workers, though falling sharply, remains historically high.

Central bank policymakers hope that a cooling labor market will translate to lower wage growth, which has been running at its highest rate in decades and signals that inflation has become embedded in the economy.

“So I too am in the camp that we likely have a recession in the U.S. … I think most likely we might be in a recession in Europe, and so until you get to that point where you see a change — whether it’s in labor, the demand side — you are going to see central banks continue to move on that trajectory,” Solomon added.

U.S. GDP contracted by 0.9% in the second quarter of 2022, its second consecutive quarterly decline and a strong signal that the economy is in recession.

Fellow Wall Street titan Dimon agreed that the Fed would likely continue hiking rates aggressively before pausing to allow the data to begin reflecting its efforts to rein in inflation, but struck a similarly pessimistic tone on the outlook for economic growth.

“But American consumers, eventually the excess money they have is running out. That will probably happen sometime mid-year next year, and then we will know more about what is going on with oil and gas prices and that kind of thing, so we will find out,” Dimon said.

One thing is clear at the start of the corporate earnings season: Inflation remains a hot topic for companies.

About two-thirds of companies in the S&P 500 that reported earnings in the first two weeks of the season (Oct. 10-21) had representatives mention inflation, according to a search of conference call transcripts by FactSet. Included among those companies are PepsiCo, Citigroup and Abbott Laboratories.

“The environment clearly is still very inflationary with a lot of supply chain challenges across the industry,” said PepsiCo CEO Ramon Laguarta. The snack and beverage company beat analyst expectations for both revenue and earnings per share as its price hikes buoyed its bottom line, even as some units saw volume declines.

Recent economic data shows little sign of inflation letting up.

The consumer price index increased 0.4% in September, which was a hotter reading than the 0.3% expected by Dow Jones, according to the Bureau of Labor Statistics. It was at 0.6% without food and energy factored in, which was also above Dow Jones’ estimate of 0.4%.

The producer price index, which gauges wholesale prices, also rose 0.4% in September. That was similarly above the Dow Jones expectation of 0.2%.

Lingering inflation has led consumers to rethink expensive purchases as their spending power is squeezed and has also created higher costs for companies like Procter & Gamble. Last week the household goods maker of brands like Tide and Charmin posted quarterly results that narrowly outperformed analyst expectations.

“Raw- and packaging-material costs inclusive of commodities and supply inflation have remained high since we gave our initial outlook for the year in late July,” Chief Financial Officer Andre Schulten said during Wednesday’s conference call. “Based on current spot prices and latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal 2023.”

The company was among a handful of multinationals that said inflation abroad was chomping at international bottom lines as well as in the U.S. Citigroup and Pool, which distributes pool supplies, both said inflation in Europe hurt their businesses in the previous quarter.

Pool said total construction volume would likely be down in 2022 compared to 2021, though it beat expectations for the quarter.

Inflation is also making it harder for some companies to fill positions. Human resources company Robert Half said the workforce remains tight, while Snap-On said wages had to continue growing to get skilled workers. To be sure, Union Pacific said crew availability continued to improve and HCA Healthcare said it could lean less on contract workers to fill voids.

This year’s inflationary pressure have led to multiple rate increases from the Federal Reserve. It is expected to keep hiking until the end of 2022, at least.

On the fiscal side, the government passed the Inflation Reduction Act earlier this year.

Multiple companies said the Inflation Reduction Act would likely help their outlook, with those who emphasize green energy poised to benefit from the legislation’s tax credits for alternative energy forms.

Electric vehicle maker Tesla said it was too early to predict specific impacts on demand, but they did expect to benefit from the legislation’s benefits for consumers who migrate away from gas-powered cars. The company beat earnings per share expectations for the third quarter but revenue came in lower than analysts anticipated.

Predictions about how long these pressures will last varies with the executives being asked for their opinion.

“Inflation continues to be a stubborn force globally, though we’ve started to see some moderating impacts in certain areas of our businesses compared to earlier in the year,” Abbott CEO Robert Ford said Oct. 19. The science company beat expectations for the quarter with per-share earnings nearly 23% higher than expected.

Manufacturing company Dover also said inflation has come down compared to the past year and a half, specifically pointing to the company’s decreasing costs related to logistics and raw material. That view is in line with that of some economics experts, who said “soft” inflation gauges are falling faster than the main indicators the Fed favors like the consumer price index which can lag.

“Clearly, we have some caution in terms of what’s going to develop in the marketplace,” said Dover CEO Richard Tobin on Oct. 20. “I fundamentally disagree with what the Fed is doing now.”

Others weren’t as upbeat, though. Whirlpool and Tractor Supply Company both said inflation should persist at the current level for the first half of 2023 before cooling. Tractor Supply beat per-share earnings but missed on sales, while Whirlpool came in below expectations for per-share earnings by about 16%.

“Inflation remains persistent and elevated, and we anticipate this to continue well into 2023 with some moderation in the back half of 2023,” Tractor Supply CEO Harry Lawton said.

The U.S. budget deficit was sliced in half for fiscal 2022, the biggest drop in history following two years of huge Covid-related spending.

Though still large in historical terms, the budget shortfall declined to $1.375 trillion, compared to the 2021 deficit of $2.776 trillion.

The decline would have been steeper had it not been for the Biden administration’s student loan forgiveness program. Education spending totaled $639.4 billion for the fiscal year, $408 billion higher than estimated.

The 2022 fiscal year saw $4.896 trillion in revenue against $6.272 trillion in outlays. The outlays number represented about a $550 billion decline in spending but an $850 billion increase in revenue. The revenue total is by far the highest ever for the U.S. government.

Deficits in the previous two years soared as Congress shelled out massive sums to combat the pandemic.

The shortfall hit a record $3.13 trillion in 2020 due to more than $5 trillion in CARES Act spending and other outlays. In 2019, the deficit was $983.6 billion. Prior to 2020, the highest deficit ever was $1.41 trillion in 2009 as the financial crisis came to a close. The U.S. briefly ran a surplus from 1998 to 2001.

In fiscal 2021, legislators passed the American Rescue Plan, a $1.9 trillion spending package that the White House said helped get the nation through a severe health and economic crisis, but which critics say was unnecessary and helped fuel the highest inflation rate in more than 40 years.

President Joe Biden, however, placed the deficit blame on Republicans for approving the 2017 tax cut bill.

“The federal deficit went up every single year in the Trump administration — every single year he was president,” he said. “It went up before the pandemic. It went up during the pandemic. It went up every single year on his watch, Republican’s watch.”

Biden called the GOP fiscal approach “mega-MAGA trickle down” that he defined as “the kind of policies that have failed the country before and it’ll fail it again.”

Treasury Secretary Janet Yellen said the budget statement released Friday “provides further evidence of our historic economic recovery, driven by our vaccination effort and the American Rescue Plan.”

Yellen added that the results also showed Biden’s “commitment to strengthening our nation’s fiscal health.”

Earlier this year, the White House pushed through the Inflation Reduction Act aimed at a variety of areas including reducing medical costs, boosting clean energy and reforming the tax code. However, inflation has continued to climb, and administration officials have stressed that the Federal Reserve’s primary role in fighting price increases is through interest rate hikes.

—CNBC’s Emma Kinery contributed reporting.

Tesla founder and CEO Elon Musk thinks the global economic decline could last for another year and a half.

In a Twitter exchange early Friday morning Eastern time, the mercurial electric car executive and world’s richest man said a recession could continue “until spring of ’24.”

The remarks came in response to a tweet from Shibetoshi Nakamoto, the online name for Dogecoin co-creator Billy Markus, who noted that current coronavirus numbers “are actually pretty low. i [sic] guess all we have to worry about now is the impending global recession and nuclear apocalypse.”

“It sure would be nice to have one year without a horrible global event,” Musk replied.

Tesla Owners Silicon Valley, a Twitter account with nearly 600,000 followers, then asked Musk how long he thought the recession would last, to which he replied, “Just guessing, but probably until spring of ’24.”

Global GDP grew 6% in 2021 but is expected to decelerate to 3.2% this year and 2.7% in 2023, according to the International Monetary Fund. That would mark the weakest pace of growth since 2001 outside of the financial crisis in 2008 and the brief plunge in the early days of the Covid pandemic. The Federal Reserve projects GDP in the U.S. to grow just 0.2% this year and 1.2% in 2023.

Musk becomes the latest corporate titan to express reservations about the economy.

In a tweet Wednesday, Amazon founder Jeff Bezos said it’s time to “batten down the hatches” in preparation for rough economic waters ahead. That tweet accompanied a video of Goldman Sachs CEO David Solomon, who said in a CNBC interview that he thinks there’s a “good chance” of a recession in the U.S.

JPMorgan Chase CEO Jamie Dimon also has been warning of economic turmoil ahead.

Musk’s comment also came amid a rough week for Tesla stock as the automaker missed revenue estimates and cautioned about a potential delivery shortfall this year.

During the analyst call, Musk expressed more confidence in the U.S. economy than other parts of the world. He also noted the impact that interest rate increases are having on the economy.

“The U.S. actually is in — North America’s in pretty good health,” he said. “A little bit of that is raising interest rates more than they should, but I think they’ll eventually realize that and bring back down, I think.”

However, he said China is in “quite a burst of a recession of sorts” driven by the real estate market, while Europe “has a recession of sorts, driven by energy.”

Correction: A previous version of this article misstated past GDP growth.