The economy’s in a “hold-your-breath moment"

Tuesday, September 26, 2023:

Hello everyone,

You know the drill. It's Future Perfect fellow Rachel, and here's what dominating the news cycle today:

Up first: The weird economy, explained

In other news: developments in the South China Sea, the next Republican debate, and long Covid

UP FIRST

Will the economy finally un-weird itself?

Klaus Vedfelt via Getty Images

The economy's in a "hold-your-breath moment." The labor market is cooling off, inflation has moderated, and the country's GDP grew in the third quarter. But there are also some negative indicators as well: Pandemic-era savings have been spent, government benefit programs are drying up, and a federal shutdown could be on the horizon.

The lowdown: The economy is not in bad shape at the moment.

But factors that may seem small on their own could add up to a significant drag on the economy. The United Auto Workers strike, the pending resumption of student debt payments, and the risk of a government shutdown represent a "triple threat on the economy," Vox's business and economics correspondent Emily Stewart writes.

The job market is returning to "normal." After tumultuous pandemic years, in recent months people have resumed quitting their jobs at normal rates and job gains have steadied.

The Fed is the wild card. In September, the Fed left interest rates unchanged (a sign that it's optimistic about the economy). But it's expected to raise interest rates once more this year and has also indicated it will keep rates higher for longer in 2024. That means borrowing costs will likely stay high.

The stakes: Forecasts are just educated predictions, which means it's unclear what people should do to prepare for the immediate economic future. Anyone who claims to have complete certainty about what's happening next in the economy is lying, Emily told me.

"As a general rule, I can't tell people how to feel about the economy. Nobody can," she said. "I think there are definitely reasons for optimism — the labor market remains strong, inflation is coming down — but there are risks as well, like there always are."

Every month some expert warns of an impending recession that doesn't come. Since we haven't hit the recession yet, there are concerns one might be on the way. All the good economic news of late, however, means there's at least some hope a recession isn't actually on the horizon.

"I don't think that people should wake up every day worried about what's happening in the economy, but it does matter," said Emily. "If there's a recession, it's going to be painful for a lot of people; we'd much, much rather have an economy that's growing and strong."

Read Emily's explainer here.

HEY READERS!

This month, we're aiming to add 2,500 financial contributions from readers to help keep Vox's unique explanatory journalism free for everyone. Will you join us?

Yes, I'll give to help keep Vox free

NEXT UP

What is happening in the South China Sea?

TED ALJIBE/AFP via Getty Images

Earlier this week, the Philippine Coast Guard conducted a "special operation" where they cut a floating barrier installed by China in the Scarborough Shoal, a prime fishing spot where Filipino fishers are legally allowed to fish. Under an international legal ruling, the shoal is part of the Philippines' economic waters — but it has become a locus of conflict as China attempts to assert sovereignty over it and surrounding waters in the South China Sea:

China claims nearly all the territory in the South China Sea. While an international ruling (under a treaty China signed on to) nullified China's claim, the country continues to deny the Philippines, Brunei, Malaysia, Taiwan, and Vietnam hold ownership over parts of the sea. [Al Jazeera]

The 300-meter barrier, which was installed by China, was intended to block Filipino fishing vessels from fishing in the Scarborough Shoal. "The barrier posed a hazard to navigation, a clear violation of international law. It also hinders the conduct of fishing and livelihood activities of Filipino fisherfolk," the Philippine Coast Guard said in a statement. [BBC]

The newest president of the Philippines, Ferdinand Marcos Jr., is less sympathetic to China than his predecessor. Over the last year tensions between the two Asian countries have heightened, with the Philippines offering the US expanded access to a military base in the country and the Chinese coast guard performing increasingly aggressive military maneuvers in the disputed territory. This week's act is one of the clearest direct actions taken so far in this heightening dispute. [NBC News]

AROUND THE WEB

Seven candidates qualified for the second Republican presidential debate. Gov. Ron DeSantis, Sen. Tim Scott, former UN ambassador Nikki Haley, entrepreneur Vivek Ramaswamy, former Gov. Chris Christie, Gov. Doug Burgum, and former VP Mike Pence will all participate. Former President Donald Trump has once again refused to participate. [AP News]
Some users can now prompt ChatGPT using images and voice memos. For the next two weeks, ChatGPT Plus and enterprise customers can add an image (either by taking a new picture or uploading one) and use audio to prompt the chatbot. [Axios]
A blood test for long Covid may be on the horizon. Scientists found key differences in the blood of those who still suffer from Covid versus those who recovered. This research is some of the first to prove that, "long Covid is, in fact, a biological illness," David Putrino, principal investigator of the new study and a professor of rehabilitation and human performance at the Icahn School of Medicine, told NBC. [NBC News]
Cough syrup deaths overseas prompt US crackdown on toxin testing. More than 300 child deaths have been linked to cough syrups made in India and Indonesia. The poisonings induced further regulatory scrutiny in the US (where more than 100 people died in the 1930s from such poisoning). [Reuters]