The Higgins Report: Still Positive About 2022, but…

…the winds of change are in the air

By Joe Higgins, Quest 4 Quality

Here’s my current read on the economy, based on the latest leading indicators:

March Unemployment

I had predicted from the stage at the Summit in Las Vegas that we would see solid numbers for unemployment in the March 2022 jobs report. As usual, the economy did not let me down. America added 431,000 jobs last month, which was the 15th consecutive month of job growth. Average hourly workers’ wages rose 5.6 percent, and the unemployment rate dropped to near historic lows of 3.6 percent.

Here’s more good news: In February we reportedly created 678,000 jobs, and that number was revised to 750,000. So, adding February and March, the new two-month total is 1.2 million new jobs. What’s more, the Bureau of Labor Statistics (BLS) is reporting that there are over 11 million jobs available this month, which await any unemployed American.  

Job creation is one of the critical indicators of a healthy economy, and we are witnessing the fastest rise in employment in U.S. history — with a long way to go, economists believe, before it slows.

Consumer Confidence

Two weeks ago, the Conference Board reported that its Consumer Confidence Index increased from 105.7 in February to 107.2 in March. Now, I know a 1.5-point uptick is not significant. But despite the average price of gasoline at $4.32 in the U.S.; the new BA.2 COVID variant growing in many states; and Russia’s disastrous war continuing in Ukraine, consumers have remained surprisingly upbeat. Another indicator that came out of this month’s report was that Americans are very optimistic about COVID restrictions being removed throughout the country. Travel is up, consumers have been out spending during the month, and with summer approaching, there will be more retail activity.

The Yield Curve

You may have heard that some banks and investment houses were concerned about an “inversion of the yield curve.” Economists believe the inversion between the ten-year bond and the two-year bond could be indicative of a coming recession, but I think it’s the wrong metric. According to the Federal Reserve, the numbers you need to watch are the yield curve’s slope between the ten-year and the 90-day Treasury Bills. Presently the spread is 2.02 percent, which is not even close to an inversion.

But what if Powell and the Fed decide to raise rates by 50 basis points in May to slow down the overheated economy to lower inflation levels? In that case, an inversion could happen quicker than the current numbers indicate. Based on past performance, should an inversion should occur, a recession would not follow until the middle of 2023.

So What Could Go Wrong?

Spending will begin to slow as the year progresses, for several reasons. As I pointed out in Las Vegas, GDP increased 5.7 percent in 2021, which was the best year for U.S. economic growth since 1984. This level of explosive growth was born out of trillions in stimulus spending in the Cares Act and the American Rescue Plan Act. We will not see a renewal of government cash paid directly to consumers for the balance of this year or in 2023.

The other problem is that personal savings accounts, which became very flush with cash over the past two years, are now depleting rapidly. In addition, Americans have substantially cut their use of credit over the past year; in fact, the average credit card balance in the U.S. now stands at $5,525, a decrease of 6 percent year over year.

By now, you all know that Fed Chair Jerome Powell is raising interest rates to slow down an incredibly overheated economy, so a drop in activity at this point might be helpful. Over the past two years, COVID-19 combined with massive consumer spending decimated supply chains, strained the trucking industry, and created chaos in the ports. This has all contributed to the inflationary spiral that is causing so much pain in our society.

So, do we need a slowdown in job growth as well? I am all for solid gains in employment, but this level of job creation is unsustainable. It is also highly inflationary when employee wages are rising by 5.6 percent and make up the most significant expense in a dealer’s profit-and-loss statement. This fosters price increases.

Economists are mixed as to whether a planned slowdown will become a recession. The dance that Powell will be doing is a precarious one. If history is a guide, raising interest rates could easily lead to recession — just look at what happened with the “double-dip” recessions of 1980 and 1981. The jury will be out for months before rising interest rates impact the Consumer Price Index. Powell and the Federal Reserve will be judged by controlling inflation, job growth and a growing economy.

The Bottom Line

The ideal outcome for the Fed would be inflation at 2 percent, unemployment at 3.4 percent, and GDP growth above 3 percent without a recession by the end of 2022. This scenario is possible, maybe even probable, but 2023 could be our undoing. Let’s follow these numbers this year and watch a unique period in U.S. history unfold.

Joe Higgins is a 44-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YSN contributor. Visit his website, Quest 4 Quality with Joe, at

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