🔭 2023 mega-themes

Bidenomics and more | Tuesday, January 03, 2023

Open in app View in browser     Axios Macro By Neil Irwin and Courtenay Brown · Jan 03, 2023 Happy New Year! Today, we let you in on what we're thinking about major economic themes and questions we expect to focus on in the coming year. See something we're missing? Hit reply and let us know. It's a big Macro week, capped off with the December jobs report on Friday. Let's get to it. Today's newsletter, edited by Javier E. David, is 661 words, a 2½-minute read.     The economic storylines we're focused on for '23 Illustration: Brendan Lynch/Axios   The new year is invariably a time for taking stock of things and contemplating what may lie ahead. We spent our holiday break doing just that. Why it matters: The economic challenges of 2022 can be viewed as the lagged effects of disruptions set off by the pandemic nearly three years ago. It suggests the end of the bullwhip (maybe). In markets as varied as those for labor, housing, automobiles and travel, we have seen three years of wild swings, with dramatic shifts in supply and demand spurred by the pandemic itself and the supersized economic policy response to it. This year, likely to feature slower growth and possibly a recession, offers a chance for these markets to come into a more stable equilibrium. Zoom out: The world is more shock-filled. Policymakers worldwide have warned of a more unstable period where global conflicts, pandemics and climate change are the norm. 2023 will be a test of whether the world is truly entering a new period of persistent shocks — one that creates persistent supply challenges and makes it harder to maintain low and stable inflation. Meanwhile, there's pain ahead for America's workers. One huge question this year is whether inflation can, in fact, continue to come down with only minimal damage to the labor market. Exactly who will bear the brunt of the pain is another big theme to watch. So far, layoffs have been concentrated in sectors like technology, where workers tend to be well-compensated and in-demand. And central banks are diverging. "Global synchronized tightening" was a buzzy phrase of 2022, as most central banks across the globe raised interest rates aggressively. The bottom line: Major central banks took near-identical steps in 2022 as they faced a common enemy of high inflation. We could see their approaches diverge in 2023, as the effects of those actions play out differently in different countries, depending on their domestic inflation and growth situations. Read more.     A message from Axios Executive Edge: 5 strategies for a strong start to 2023     On Jan 12, hear from Intel CCO Tara Smith, Axios CEO Jim VandeHei and more as they share how to jumpstart productivity in a new year, inspire innovation at every level of their org, and secure a culture of clear, transparent communication that powers future success. Register today     2. Bidenomics, China and the Fed President Biden at a November event touting U.S. manufacturing. Photo: Nic Antaya/Bloomberg via Getty Images   The new American industrial policy. Over the first two years of the Biden administration, Congress passed a series of bills that will deploy billions to try to create a more vibrant, resilient U.S. economy. "Bidenomics" amounts to a new form of industrial policy, using the power of the state to try to guide the development of entire sectors. It takes the form of the infrastructure law enacted in 2021; the 2022 Inflation Reduction Act, which includes billions for clean energy investment; and a law enacted last summer aimed at bolstering the American semiconductor industry. In 2023, those laws are entering a crucial execution phase. Will these investments generate lasting benefits for the United States, or fund politically connected boondoggles? The stakes are huge. China is reopening, and the impact will ripple across the world. For nearly three years, an unyielding "zero-COVID" p0licy in the globe's second-largest economy contributed to the supply chain stress that helped push up prices elsewhere, and crushed China's own economic activity. The unwinding of the policy is a huge wildcard for the global economy, and predictions for what it means are all over the map. On the one hand, fewer COVID-related production shutdowns might mean fewer supply chain bottlenecks — though widespread infections may pose challenges of their own. On the other hand, China's economy once again operating at full-speed (or close to it) might put upward pressure on worldwide commodity prices as demand rebounds. Bumpy politics for the Federal Reserve. The U.S. central bank's rate hikes have already tanked the stock market and caused a dramatic slowdown in housing. Expect new political blowback as well. Already, some Democratic members of Congress have assailed the Fed's rate-raising campaign and its impact on workers. Some Republicans want to scale back the system of regional Fed banks that they see as unaccountable and inappropriately political. Chair Jerome Powell hasn't testified on Capitol Hill since June, and when he next appears — semiannual monetary policy testimony is usually in February — his welcome there could be frosty.     A message from Axios 3 steps to clearer essential communication     You can have the smartest people and the strongest strategy, but your organization will fail without clear communication. Yes, but: A simple strategy — called "Up, Down, Around" — is helping leaders elevate what's essential and keep stakeholders aligned. See how it works.   Are you a fan of this email format? Your essential communications — to staff, clients and other stakeholders — can have the same style. Axios HQ, a powerful platform, will help you do it.   Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. 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