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Opinion The economic outlook might not be that gloomy after all

People walk past a sign advertising job opportunities outside a restaurant in Arlington on June 3. (Olivier Douliery/AFP/Getty Images)

Headlines are unlikely to announce, “Hey, the economy is not all terrible!” But amid inflation worries and fears of recession, there is plenty of good economic news.

June’s job numbers were stronger than expected, with 372,000 jobs added and the unemployment rate steady at 3.6 percent. That means the country has recovered virtually all the jobs lost during the pandemic. As President Biden said last Friday, “We have more Americans working today in the private sector than any day under my predecessor, more today than any time in American history — today. In the second quarter of this year, we created more jobs than any quarter under any of my predecessors in nearly 40 years before the pandemic.”

While that might produce angst that the economy is still too “hot,” the flip side is that the United States so far does not seem to be on the verge of a recession. And on the inflation front, gas prices have been steadily declining for almost a month, even without gimmicks such as the proposed gas tax holiday.

Things could be even better if Senate Minority Leader Mitch McConnell (Ky.) stopped holding hostage the popular bipartisan bill that would make the United States more competitive against China in semiconductor manufacturing. The Republican leader has refused to support the bill unless Democrats drop their reconciliation bill that would cut the deficit, contain drug prices and extend Medicare solvency.

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Commerce Secretary Gina Raimondo, in an interview with ABC News’s George Stephanopoulos on Sunday, made clear that the semiconductor bill “has to pass now. Not in six months from now, now.” She added, “Mitch McConnell just threw a wrench in that about a week ago, saying that he wasn’t going to allow Republicans to move on that unless we move down reconciliation. That’s a perfect example, George, of increasing supply. We have inflation now because of lack of supply.”

She ridiculed the idea that the administration would have to choose between that bill and the reconciliation package. “Why can’t we do both? What’s in that reconciliation bill? Allowing Medicare to negotiate for drug prices. What will that do? Bring down the prices of medicine for the average American consumer.” She added, “It’s a false choice. He’s playing politics with our national security, and it’s time for Congress to do its job on both of those dimensions.” It’s a good argument — and one the GOP should consider as some of its Senate nominees flounder in advance of the midterms.

The administration readily agrees that inflation remains its top concern. The Fed will need to continue raising interest rates, thereby increasing the chance of recession. But there seems to be more optimism about a “soft landing,” which UBS Global Wealth Management now puts as the most likely scenario (40 percent), rather than recession or stagflation. Citi pegs the chances of a soft landing at 55 percent.

Certainly, not all economists agree, but the relative strength of the U.S. economy compared with Europe, for example, should not be discounted. The potential that Democrats might actually manage to pass a pro-growth bill while also slicing drug prices and the deficit suggests that the worst-case scenarios might not pan out, despite an obstructionist GOP, a war raging in Ukraine and the cloud of inflation. While news coverage remains doggedly pessimistic, if you look carefully, you might spot the outlines of steady growth without an economic crash.

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