The first reason is simple: volume. In the first half of 2025, about 20.9 million barrels per day of oil moved through the strait, equal to roughly one-fifth of global petroleum liquids consumption and about one-quarter of all maritime oil trade. More than 20% of global LNG trade also passed through Hormuz, much of it from Qatar. The International Energy Agency describes the strait as one of the world’s most critical oil transit chokepoints and warns that alternatives can reroute only a portion of what normally moves through it.

At first glance, that might sound more important to Asia than to the United States, and in direct import terms, it is. The EIA says the United States imported about 0.4 million barrels per day of crude and condensate through Hormuz in the first half of 2025, just 7% of U.S. crude and condensate imports and about 2% of U.S. petroleum liquids consumption. But that statistic can be misleading. Oil is priced in a global market. When a waterway carrying one-fifth of the world’s oil supply is threatened, the United States does not get a pass because it imports less directly from the Gulf than it used to. American drivers, trucking companies, airlines and consumers still feel the shock through higher global crude prices and higher transportation costs.

That is exactly what recent events have underscored. Reuters reported this month that the EIA expects U.S. gasoline prices to remain elevated for months even after flows through Hormuz eventually recover, and AP reported oil prices jumping sharply after the latest U.S. move involving Iranian ports, with U.S. crude rising 8% and Brent gaining 7% in early trading. In other words, Hormuz matters to Americans not only because of where the oil goes first, but because of what happens to the price of energy everywhere when the route is disrupted.

The second reason Hormuz matters to the United States is alliance politics. Most of the oil and gas moving through the strait is headed to Asia. The EIA estimates that 89% of the crude and condensate that transited Hormuz in the first half of 2025 went to Asian markets, while the IEA says Japan and South Korea, both close U.S. allies, are particularly reliant on crude flows passing through the strait. A serious interruption there does not just threaten energy supply; it threatens the economic stability of countries that anchor the U.S. alliance system in the Indo-Pacific. That gives the passage strategic importance well beyond America’s own direct imports.

There is also a military reason. The U.S. does not just see Hormuz as an energy corridor. It sees it as a test of whether international waterways remain open to civilian commerce. CENTCOM has called the strait “an international sea passage and an essential trade corridor,” and said roughly 100 merchant vessels transit it on a typical day. That language matters. For Washington, freedom of navigation is not an abstract slogan. It is a principle tied to deterrence, maritime order and the credibility of U.S. power. If a hostile actor can threaten or close a chokepoint like Hormuz, the concern in Washington is not limited to fuel markets; it extends to the broader question of whether the rules of global commerce can still be enforced.

Shipping itself is another part of the story. The International Maritime Organization notes that the strait operates through an established traffic separation scheme designed to manage dense vessel movement and reduce collisions. When security deteriorates, the problem is not only that fewer ships move through. Insurance costs rise, crews face greater danger, routes become less predictable and delays ripple outward into supply chains. The IMO said in March that attacks and threats in and around Hormuz were endangering commercial vessels and seafarers, underscoring how quickly a military crisis can become a trade crisis.

Then there is the spare-capacity problem, which gets less attention but may be just as important. The IEA notes that a prolonged disruption in Hormuz could strand not just oil exports, but much of the world’s usable spare production capacity, most of it held by Saudi Arabia. That matters to the United States because spare capacity is one of the few real shock absorbers in an oil crisis. If the route that carries both supply and emergency backup barrels is compromised, markets become more fragile and price spikes become harder to contain.

So why is the Strait of Hormuz important to the United States? Because it sits at the intersection of energy, inflation, military deterrence and alliance stability. America may no longer depend on Gulf oil the way it once did, but it still depends on a world economy that does. As long as a fifth of the world’s oil and a major share of LNG pass through that narrow channel, events there will continue to shape U.S. policy, U.S. prices and U.S. strategic calculations. The strait may be thousands of miles away, but for Washington, it is never really distant.

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WASHINGTON (AP) — The U.S. economy surprisingly accelerated to a 2.4% annual growth rate from April through June, showing continued resilience in the face of steadily higher interest rates resulting from the Federal Reserve’s 16-month-long fight to bring down inflation.

Thursday’s estimate from the Commerce Department indicated that the gross domestic product — the economy’s total output of goods and services — picked up from the 2% growth rate in the January-March quarter. Last quarter’s expansion was well above the 1.5% annual rate that economists had forecast.

Driving last quarter’s growth was a burst of business investment. Excluding housing, business spending surged at a 7.7% annual rate, the fastest such pace since early 2022. Companies plowed more money into factories and equipment. Increased spending by state and local governments also helped fuel the economy’s expansion in the April-June quarter.

Consumer spending, the heart of the nation’s economy, was also solid last quarter, though it slowed to a 1.6% annual rate from a robust 4.2% pace in the first quarter of the year.

Investment in housing, though, fell, weakened by the weight of higher mortgage rates.

“This is a strong report, confirming that this economy continues to largely shrug off the Fed’s aggressive rate increases and tightening credit conditions,’’ said Olu Sonola, head of U.S. economics at Fitch Ratings. “The bottom line is that the U.S. economy is still growing above trend, and the Fed will be wondering if they need to do more to slow this economy.”

In fighting inflation, which last year hit a four-decade high, the Fed has raised its benchmark rate 11 times since March 2022, most recently on Wednesday. The resulting higher costs for a broad range of loans — from mortgages and credit cards to auto loans and business borrowing — have taken a toll on growth.

Still, they have yet to tip the United States into a widely forecast recession. Optimism has been growing that a recession isn’t coming after all, that the Fed can engineer a so-called “soft-landing” — slowing the economy enough to bring inflation down to its 2% annual target without wrecking an expansion of surprising durability.

This week, the International Monetary Fund upgraded its forecast for U.S. economic growth for all of 2023 to 1.8%. Though that would be down from 2.1% growth for 2022, it marked an increase from the 1.6% growth that the IMF had predicted for 2023 back in April.

At a news conference Wednesday after the Fed announced its latest quarter-point rate hike, Chair Jerome Powell revealed that the central bank’s staff economists no longer foresee a recession in the United States. In April, the minutes of the central bank’s March meeting had revealed that the Fed’s staff economists envisioned a “mild” recession later this year.

In his remarks, Powell noted that the economy has proved resilient despite the Fed’s rapid rate hikes. And he said he still thinks a soft landing remains possible.

By any measure, the American job market has shown itself to be remarkably strong. At 3.6% in June, the unemployment rate hovers just above a five-decade low. A surge in retirements after COVID-19 hit in early 2020 has contributed to a shortage of workers across the country, forcing many companies to raise wages to attract or keep staffers.

Higher pay and job security are giving Americans the confidence and financial wherewithal to keep shopping. Indeed, consumer spending, which drives about 70% of economic activity, rose at a 4.2% annual rate from January through March, the fastest quarterly pace in nearly two years. Americans have kept spending — crowding airplanes, traveling overseas and flocking to concerts and movie theaters.

And the Conference Board, a business research group, reported Tuesday that Americans this month are in their sunniest mood in two years, based on the board’s reading of consumer confidence.

Indeed, many consumers are finally enjoying some relief from spiking prices: Year-over-year inflation, which peaked at 9.1% in June 2022, has eased consistently ever since. Inflation-adjusted hourly pay rose 1.4% in June from a year earlier, the sharpest such gain since early 2021.

“Inflation is easing, moving in the right direction,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. ”In other words, the Fed is achieving what it wants without causing damage to the economy, so they don’t need to push too hard from this point on.’’

Still, Farooqi suggested, the surprisingly healthy GDP report makes it somewhat more likely that the Fed will raise rates again because the economy appears to be “much stronger’’ than what the central bank would like to see. With stronger growth comes a greater likelihood of high inflation.

But Thursday’s GDP report contained some encouraging news for the Fed’s inflation fighters: One measure of prices — the personal consumption expenditures index — rose at a 2.6% annual rate last quarter, down from a 4.1% pace in the January-March quarter, to the lowest level since the end of 2020.

Though that is still above the Fed’s 2% inflation target, it amounts to “another welcome sign of disinflation,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.

The Biden White House’s Council of Economic Advisers estimated Thursday that investment in factories and other manufacturing facilities added 0.4 percentage point of growth last quarter, the largest such proportion since 1981. President Joe Biden pushed the Inflation Reduction Act and the CHIPS Act last year to encourage domestic manufacturing. Michael Feroli, chief U.S. economist at JP Morgan Chase, agreed that much of last quarter’s uptick in business investment was “likely in response to recent federal incentives.’’

“This progress wasn’t inevitable or accidental,’’ the president said in a statement. “It is Bidenomics in action.’’

The risk remains that the weight of ever-higher interest rates will eventually slow borrowing so much — for homes, cars, renovations, business expansions and other costly expenses — as to pull the economy into recession.

Among the economy’s weakest links has been the housing market. In June, sales of previously occupied homes sank to their slowest pace since January. The problem is that a near-historic low number of homes for sale and higher mortgage rates kept many would-be homebuyers on the sidelines. Sales fell 19% compared with June 2022 and were down 23% through the first half of the year.

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WASHINGTON (AP) — The second consecutive quarter of economic growth that the government reported Thursday underscored that the nation isn’t in a recession despite high inflation and the Federal Reserve’s fastest pace of interest rate hikes in four decades.

Yet the U.S. economy is hardly in the clear. The solid growth in the October-December quarter will do little to alter the widespread view of economists that a recession is very likely sometime this year.

For now, the economy expanded at a 2.9% annual rate in the fourth quarter, though some of the underlying figures weren’t as healthy. Consumer spending, for example, grew at a slower pace than in the previous quarter, and business investment was weak. Last quarter’s growth was fueled by factors that won’t likely last. These include companies’ restocking of inventories and a drop in imports, which meant that more spending went to U.S.-made goods.

Increased borrowing rates and still-high inflation are expected to steadily weaken consumer and business spending. Businesses will likely pare expenses in response, which could lead to layoffs and higher unemployment. And a likely recession in the United Kingdom and slower growth in China will erode the revenue and profits of American corporations. Such trends are expected to cause a U.S. recession sometime in the coming months.

Still, there are reasons to expect that a recession, if it does come, will prove to be a comparatively mild one. Many employers, having struggled to hire after huge layoffs during the pandemic, may decide to retain most of their workforces even in a shrinking economy.

Six months of economic decline is a long-held informal definition of a recession. Yet nothing is simple in a post-pandemic economy in which growth was negative in the first half of last year but the job market remained robust, with ultra-low unemployment and healthy levels of hiring. The economy’s direction has confounded the Fed’s policymakers and many private economists ever since growth screeched to a halt in March 2020, when COVID-19 struck and 22 million Americans were suddenly thrown out of work.

Inflation, the economy’s biggest threat last year, is now showing signs of steadily declining. Used and new cars are becoming less expensive. Price increases for furniture, clothes and other physical goods are slowing.

Last year, the Fed raised its benchmark interest rate seven times, from zero to a range of 4.25% to 4.5%. The Fed’s policymakers have projected that they will keep raising their key rate until it tops 5%, which would be the highest level in 15 years. As borrowing costs swell, fewer Americans can afford a mortgage or an auto loan. Higher rates, combined with inflated prices, could deprive the economy of its main engine — healthy consumer spending.

Fed officials have made clear that they’re willing to tip the economy into a recession if necessary to defeat high inflation, and most economists believe them. Many analysts envision a recession beginning as early as the April-June quarter this year.

So what is the likelihood of a recession? Here are some questions and answers:

WHY DO MANY ECONOMISTS FORESEE A RECESSION?

They expect the Fed’s aggressive rate hikes and high inflation to overwhelm consumers and businesses, forcing them to slow their spending and investment. Businesses will likely also have to cut jobs, causing spending to fall further.

Consumers have so far proved remarkably resilient in the face of higher rates and rising prices. Still, there are signs that their sturdiness is starting to crack.

Retail sales have dropped for two months in a row. The Fed’s so-called beige book, a collection of anecdotal reports from businesses around the country, shows that retailers are increasingly seeing consumers resist higher prices.

Credit card debt is also rising — evidence that Americans are having to borrow more to maintain their spending levels, a trend that probably isn’t sustainable.

More than half the economists surveyed by the National Association for Business Economics say the likelihood of a recession this year is above 50%.

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WHAT ARE SOME SIGNS THAT A RECESSION MAY HAVE BEGUN?

The clearest signal would be a steady rise in job losses and a surge in unemployment. Claudia Sahm, an economist and former Fed staff member, has noted that since World War II, an increase in the unemployment rate of a half-percentage point over several months has always signaled a recession has begun.

Many economists monitor the number of people who seek unemployment benefits each week, a gauge that indicates whether layoffs are worsening. Weekly applications for jobless aid actually dropped last week to a historically low 190,000. Employers continue to add many jobs, causing the unemployment rate to fall in December to 3.5%, a half-century low, from 3.7%.

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ANY OTHER SIGNALS TO WATCH FOR?

Economists monitor changes in the interest payments, or yields, on different bonds for a recession signal known as an “inverted yield curve.” This occurs when the yield on the 10-year Treasury falls below the yield on a short-term Treasury, such as the three-month T-bill. That is unusual. Normally, longer-term bonds pay investors a richer yield in exchange for tying up their money for a longer period.

Inverted yield curves generally mean that investors foresee a recession that will compel the Fed to slash rates. Inverted curves often predate recessions. Still, it can take 18 to 24 months for a downturn to arrive after the yield curve inverts.

Ever since July, the yield on the two-year Treasury note has exceeded the 10-year yield, suggesting that markets expect a recession soon. And the three-month yield has also risen far above the 10-year, an inversion that has an even better track record at predicting recessions.

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WHO DECIDES WHEN A RECESSION HAS STARTED?

Recessions are officially declared by the obscure-sounding National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

The committee considers trends in hiring. It also assesses many other data points, including gauges of income, employment, inflation-adjusted spending, retail sales and factory output. It puts heavy weight on a measure of inflation-adjusted income that excludes government support payments like Social Security.

Yet the NBER typically doesn’t declare a recession until well after one has begun, sometimes for up to a year.

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DOES HIGH INFLATION TYPICALLY LEAD TO A RECESSION?

Not always. Inflation reached 4.7% in 2006, at that point the highest in 15 years, without causing a downturn. (The 2008-2009 recession that followed was caused by the bursting of the housing bubble).

But when it gets as high as it did last year — it reached a 40-year peak of 9.1% in June — a downturn becomes increasingly likely.

That’s for two reasons: First, the Fed will sharply raise borrowing costs when inflation gets that high. Higher rates then drag down the economy as consumers are less able to afford homes, cars and other major purchases.

High inflation also distorts the economy on its own. Consumer spending, adjusted for inflation, weakens. And businesses grow uncertain about the future economic outlook. Many of them pull back on their expansion plans and stop hiring. This can lead to higher unemployment as some people choose to leave jobs and aren’t replaced.

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OMAHA, Neb. (AP) — American consumers and nearly every industry will be affected if freight trains grind to a halt next month.

One of the biggest rail unions rejected its deal Monday, joining three others that have failed to approve contracts over concerns about demanding schedules and the lack of paid sick time. That raises the risk of a strike, which could start as soon as Dec. 9 under a deadline that was pushed back Tuesday.

It wouldn’t take long for the effects of a rail strike to trickle through the economy. Many businesses only have a few days’ worth of raw materials and space for finished goods. Makers of food, fuel, cars and chemicals would all feel the squeeze, as would their customers.

That’s not to mention the commuters who would be left stranded because many passenger railroads use tracks owned by the freight railroads.

The stakes are so high for the economy that Congress is expected to intervene and impose contract terms on railroad workers. The last time U.S. railroads went on strike was in 1992. That strike lasted two days before Congress intervened. An extended rail shutdown has not happened for a century, partly because a law passed in 1926 that governs rail negotiations made it much harder for workers to strike.

Here are some of the expected impacts of a rail strike:

$2 BILLION A DAY

Railroads haul about 40% of the nation’s freight each year. The railroads estimated that a rail strike would cost the economy $2 billion a day in a report issued earlier this fall. Another recent report put together by a chemical industry trade group projected that if a strike drags on for a month some 700,000 jobs would be lost as manufacturers who rely on railroads shut down, prices of nearly everything increase even more and the economy is potentially thrust into a recession.

And although some businesses would try to shift shipments over to trucks, there aren’t nearly enough of them available. The Association of American Railroads trade group estimated that 467,000 additional trucks a day would be needed to handle everything railroads deliver.

CHEMICALS RUN DRY

Chemical manufacturers and refineries will be some of the first businesses affected, because railroads will stop shipping hazardous chemicals about a week before the strike deadline to ensure that no tank cars filled with dangerous liquids wind up stranded.

Jeff Sloan with the American Chemistry Council trade group said chemical plants could be close to shutting down by the time a rail strike actually begins because of that.

That means the chlorine that water treatment plants rely on to purify water, which they might only have about a week’s supply of on hand, would become hard to get. It would be hard for manufacturers to make anything out of plastic without the chemicals that are part of the formula. Consumers will also pay more for gasoline if refineries shut down, either because they can’t get the ingredients they need to make fuel or because railroads aren’t available to haul away byproducts like sulfur.

Chemical plants also produce carbon dioxide as a byproduct, so the supply of carbon dioxide that beverage makers use to carbonate soda and beer would also be restricted, even though the gas typically moves via pipelines.

PASSENGER PROBLEMS

Roughly half of all commuter rail systems rely at least in part on tracks that are owned by freight railroads, and nearly all of Amtrak’s long-distance trains run over the freight network.

Back in September, Amtrak canceled all of its long-distance trains days ahead of the strike deadline to ensure passengers wouldn’t be left stranded in remote parts of the country while still en route to their destination.

And major commuter rail services in Chicago, Minneapolis, Maryland and Washington state all warned then that some of their operations would be suspended in the event of a rail strike.

FOOD FEARS

It would take about a week for customers to notice shortages of things like cereal, peanut butter and beer at the grocery store, said Tom Madrecki, vice president of supply chain for the Consumer Brands Association.

About 30% of all packaged food in the U.S. is moved by rail, he said. That percentage is much higher for denser, heavier items like cans of soup.

Some products, like cereal, cooking oils and beer, have entire operations built around rail deliveries of raw ingredients like grain, barley and peanuts, along with shipments of finished products.

Those companies typically keep only two to four days’ worth of raw ingredients on hand because it’s expensive to store them, Madrecki said, and grocers also keep a limited supply of products on hand.

Madrecki said big food companies don’t like to discuss the threat of a rail strike because of worries about product shortages can lead to panic buying.

HUNGRY HERDS

Any disruption in rail service could threaten the health of chickens and pigs, which depend on trains to deliver their feed, and contribute to higher meat prices.

“Our members rely on about 27 million bushels of corn and 11 million bushels of soybean meal every week to feed their chickens. Much of that is moved by rail,” said Tom Super, a spokesman for the National Chicken Council, a trade group for the industry raising chickens for meat.

The National Grain and Feed Association said a rail strike now would hit pork and chicken producers in the southern U.S. hardest, because their local supply of corn and soybeans from this year’s harvest is likely exhausted and they’d have to ship feed by truck, dramatically increasing costs.

“They only have so much storage. They can’t go without rail service for too long before they’d have to shut down the feed mills and they run into problems,” said Max Fisher, the NGFA’s chief economist.

RETAIL RISKS

Jess Dankert, the vice president for supply chain at the Retail Industry Leaders Association, said retailers’ inventory is largely in place for the holidays. But the industry is developing contingency plans.

“We don’t see, you know, canceling Christmas and that kind of narrative,” Dankert said. “But I think we will see the generalized disruption of really anything that moves by rail.”

David Garfield, a managing director with the consulting firm AlixPartners, said a rail strike could still impact holiday items shipped to stores later in December, and would definitely hamper stocking of next season’s goods.

Retailers are also concerned about online orders. Shippers like FedEx and UPS use rail cars that hold roughly 2,000 packages in each car.

AUTOMOBILE ANGST

Drivers are already paying record prices and often waiting months for new vehicles because of the production problems in the auto industry related to the shortage of computer chips in recent years.

That would only get worse if there is a rail strike, because roughly 75% of all new vehicles begin their journey from factories to dealerships on the railroad. Trains deliver some 2,000 carloads a day filled with vehicles.

And automakers may have a hard time keeping their plants running during a strike because some larger parts and raw materials are transported by rail.

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WASHINGTON (AP) — The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession.

The decline that the Commerce Department reported Thursday in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession.

The GDP report for last quarter pointed to weakness across the economy. Consumer spending slowed as Americans bought fewer goods. Business investment fell. Inventories tumbled as businesses slowed their restocking of shelves, shaving 2 percentage points from GDP.

Higher borrowing rates, a consequence of the Federal Reserve’s series of rate hikes, clobbered home construction, which shrank at a 14% annual rate. Government spending dropped, too.

The report comes at a critical time. Consumers and businesses have been struggling under the weight of punishing inflation and higher loan costs. On Wednesday, the Fed raised its benchmark rate by a sizable three-quarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades.

The Fed is hoping to achieve a notoriously difficult “soft landing”: An economic slowdown that manages to rein in rocketing prices without triggering a recession.

Apart from the United States, the global economy as a whole is also grappling with high inflation and weakening growth, especially after Russia’s invasion of Ukraine sent energy and food prices soaring. Europe, highly dependent on Russian natural gas, appears especially vulnerable to a recession.

In the United States, the inflation surge and fear of a recession have eroded consumer confidence and stirred anxiety about the economy, which is sending frustratingly mixed signals. And with the November midterm elections nearing, Americans’ discontent has diminished President Joe Biden’s public approval ratings and could increase the likelihood that the Democrats will lose control of the House and Senate.

Fed Chair Jerome Powell and many economists have said that while the economy is showing some weakening, they doubt it’s in recession. Many of them point, in particular, to a still-robust labor market, with 11 million job openings and an uncommonly low 3.6% unemployment rate, to suggest that a recession, if one does occur, isn’t here yet.

“The back-to-back contraction of GDP will feed the debate about whether the U.S. is in, or soon headed for, a recession,” said Sal Guatieri, senior economist at BMO Capital Markets. “The fact that the economy created 2.7 million payrolls in the first half of the year would seem to argue against an official recession call for now.”

Still, Guatieri said, “the economy has quickly lost steam in the face of four-decade high inflation, rapidly rising borrowing costs and a general tightening in financial conditions.”

In the meantime, Congress may be moving toward approving action to fight inflation under an agreement announced Wednesday by Senate Majority Leader Chuck Schumer and Sen. Joe Manchin, a West Virginia Democrat. Among other things, the measure would allow Medicare to negotiate prescription drug prices with pharmaceutical companies, and the new revenue would be used to lower costs for seniors on medications.

In the wake of Thursday’s government report, Biden dismissed any notion that the data depicted an economy in recession. The administration has stressed that solid job growth and low unemployment show that the U.S. economy is still growing despite two consecutive quarterly declines in GDP. Speaking from the White House, Biden leaned on remarks that Powell and other economic leaders have made.

“Both Chairman Powell and many of the significant banking personnel and economists say we’re not in recession,” the president said.

The government’s first of three estimates of GDP for the April-June quarter marked a drastic weakening from the 5.7% growth the economy achieved last year. That was the fastest calendar-year expansion since 1984, reflecting how vigorously the economy roared back from the brief but brutal pandemic recession of 2020.

But since then, the combination of mounting prices and higher borrowing costs have taken a toll. The Labor Department’s consumer price index skyrocketed 9.1% in June from a year earlier, a pace not matched since 1981. And despite widespread pay raises, prices are surging faster than wages. In June, average hourly earnings, after adjusting for inflation, slid 3.6% from a year earlier, the 15th straight year-over-year drop.

Americans are still spending, though more tepidly. Thursday’s report showed that consumer spending rose at a 1% annual pace from April through June, down from 1.8% in the first quarter and 2.5% in the final three months of 2021.

Spending on goods like appliances and furniture, which had soared while Americans were sheltering at home early in the pandemic, dropped at a 4.4% annual rate last quarter. But spending on services, like airline trips and dinners out, rose at a 4.1% rate, indicating that millions of consumers are venturing out more.

Before accounting for surging prices, the economy actually grew at a 7.8% annual pace in the April-June quarter. But inflation wiped out that gain and then some and produced a negative GDP number.

Against that backdrop, Americans are losing confidence. Their assessment of economic conditions six months from now has reached its lowest point since 2013, according to the Conference Board, a research group.

The Fed’s hikes have already led to higher rates on credit cards and auto loans and to a doubling of the average rate on a 30-year fixed mortgage in the past year, to 5.5. Home sales, which are especially sensitive to interest rate changes, have tumbled.

Even with the economy recording a second straight quarter of negative GDP, many economists do not regard it as constituting a recession. The definition of recession that is most widely accepted is the one determined by the National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

The committee assesses a range of factors before publicly declaring the death of an economic expansion and the birth of a recession — and it often does so well after the fact.

“If we aren’t yet in a recession, we soon will be,″ said Joshua Shapiro, chief U.S. economist for the economic consulting firm Maria Fiorini Ramirez Inc. “An economy rapidly losing momentum combined with aggressive monetary tightening is not a recipe for a soft landing or any other type of happy ending.″

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WASHINGTON (AP) — The U.S. economy is caught in an awkward, painful place. A confusing one, too.

Growth appears to be sputtering, home sales are tumbling and economists warn of a potential recession ahead. But consumers are still spending, businesses keep posting profits and the economy keeps adding hundreds of thousands of jobs each month.

In the midst of it all, prices have accelerated to four-decade highs, and the Federal Reserve is desperately trying to douse the inflationary flames with higher interest rates. That’s making borrowing more expensive for households and businesses.

The Fed hopes to pull off the triple axel of central banking: Slow the economy just enough to curb inflation without causing a recession. Many economists doubt the Fed can manage that feat, a so-called soft landing.

Surging inflation is most often a side effect of a red-hot economy, not the current tepid pace of growth. Today’s economic moment conjures dark memories of the 1970s, when scorching inflation co-existed, in a kind of toxic brew, with slow growth. It hatched an ugly new term: stagflation.

The United States isn’t there yet. Though growth appears to be faltering, the job market still looks quite strong. And consumers, whose spending accounts for nearly 70% of economic output, are still spending, though at a slower pace.

So the Fed and economic forecasters are stuck in uncharted territory. They have no experience analyzing the economic damage from a global pandemic. The results so far have been humbling. They failed to anticipate the economy’s blazing recovery from the 2020 recession — or the raging inflation it unleashed.

Even after inflation accelerated in spring of last year, Fed Chair Jerome Powell and many other forecasters downplayed the price surge as merely a “transitory” consequence of supply bottlenecks that would fade soon.

It didn’t.

Now the central bank is playing catch-up. It’s raised its benchmark short-term interest rate three times since March. Last month, the Fed increased its rate by three-quarters of a percentage point, its biggest hike since 1994. The Fed’s policymaking committee is expected to announce another three-quarter-point hike Wednesday.

Economists now worry that the Fed, having underestimated inflation, will overreact and drive rates ever higher, imperiling the economy. They caution the Fed against tightening credit too aggressively.

“We don’t think a sledgehammer is necessary,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said this week.

Here’s a look at the economic vital signs that are sending frustratingly mixed signals to policymakers, businesses and forecasters:

THE OVERALL ECONOMY

As measured by the nation’s gross domestic product — the broadest gauge of output — the economy has looked positively sickly so far this year. And steadily higher borrowing rates, engineered by the Fed, threaten to make things worse.

“Recession is likely,” said Vincent Reinhart, a former Fed economist who is now chief economist at Dreyfus and Mellon.

After growing at a 37-year high 5.7% last year, the economy shrank at a 1.6% annual pace from January through March. For the April-June quarter, forecasters surveyed by the data firm FactSet estimate that growth equaled a scant 0.95% annual rate from April through June. (The government will issue its first estimate of April-June growth on Thursday.)

Some economists foresee another economic contraction for the second quarter. If that happened, it would further escalate recession fears. One informal definition of recession is two straight quarters of declining GDP. Yet that definition isn’t the one that counts.

The most widely accepted authority is the National Bureau of Economic Research, whose Business Cycle Dating Committee assesses a wide range of factors before declaring the death of an economic expansion and the birth of a recession. It defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

In any case, the economic drop in the January-March quarter looked worse than it actually was. It was caused by factors that don’t mirror the economy’s underlying health: A widening trade deficit, reflecting consumers’ robust appetite for imports, shaved 3.2 percentage points off first-quarter growth. A post-holiday-season drop in company inventories subtracted an additional 0.4 percentage point.

Consumer spending, measured at a modest 1.8% annual rate from January through March, is still growing. Americans are losing confidence, though: Their assessment of economic conditions six months from now has reached its lowest point since 2013 in June, according to the Conference Board, a research group.

INFLATION

What’s agitating consumers is no secret: They’re reeling from painful prices at gasoline stations, grocery stores and auto dealerships.

The Labor Department’s consumer price index skyrocketed 9.1% in June from a year earlier, a pace not seen since 1981. The price of gasoline has jumped 61% over the past year, airfares 34%, eggs 33%.

And despite widespread pay raises, prices are surging faster than wages. In June, average hourly earnings slid 3.6% from a year earlier adjusting for inflation, the 15th straight monthly drop from a year earlier.

And on Monday, Walmart, the nation’s largest retailer, lowered its profit outlook, saying that higher gas and food prices were forcing shoppers to spend less on many discretionary items, like new clothing.

The price spikes have been ignited by a combination of brisk consumer demand and global shortages of factory parts, food, energy and labor. And so the Fed is now aggressively raising rates.

“There is a risk of overdoing it,” warned Ellen Gaske, an economist at PGIM Fixed Income. “Because inflation is so bad right now, they are focused on the here and now of each monthly CPI report. The latest one showed no letup.’’

JOBS

Despite inflation, rate hikes and declining consumer confidence, one thing has remained solid: The job market, the most crucial pillar of the economy. Employers added a record 6.7 million jobs last year. And so far this year, they’re adding an average of 457,000 more each month.

The unemployment rate, at 3.6% for four straight months, is near a half-century low. Employers have posted at least 11 million job openings for six consecutive months. The government says there are two job openings, on average, for every unemployed American, the highest such ratio on record.

Job security and the opportunity to advance to better positions are providing the confidence and financial wherewithal for Americans to spend and keep the job machine churning.

Still, it’s unclear how long a hiring boom will last. In keeping up their spending in the face of high inflation, Americans have been drawing down the heavy savings they built up during the pandemic. That won’t last indefinitely. And the Fed’s rate hikes mean it’s increasingly expensive to buy a house, a car or a major appliance on credit.

The weekly number of Americans applying for unemployment benefits, a proxy for layoffs and a bellwether for where the job market may be headed, reached 251,000 in the most recent reading. That’s still quite low by historic standards, but it’s the most since November.

MANUFACTURING

COVID-19 kept millions of Americans cooped up at home. But it didn’t stop them from spending. Unable to go out to restaurants, bars and movie theaters, people instead loaded up on factory-made goods — appliances, furniture, exercise equipment.

Factories have enjoyed 25 consecutive months of expansion, according to the Institute for Supply Management’s manufacturing index. Customer demand has been strong, though supply chain bottlenecks have made it hard for factories to fill orders.

Now, the factory boom is showing signs of strain. The ISM’s index dropped last month to its lowest level in two years. New orders declined. Factory hiring dropped for a second straight month.

A key factor is that the Fed’s rate hikes are heightening borrowing costs and the value of the U.S. dollar against other currencies, a move that makes American goods more expensive overseas.

“We doubt the outlook for manufacturing will improve any time soon,” Andrew Hunter, senior U.S. economist at Capital Economics, wrote this month. “Weakening global growth and the drag from the stronger dollar look set to keep U.S. manufacturers under pressure over the coming months.’’

HOUSING

No sector of the U.S. economy is more sensitive to interest rate increases than housing. And the Fed’s hikes and the prospect of steadily tighter credit are taking a toll.

Mortgage rates have risen along with the Fed’s benchmark rate. The average rate on a 30-year fixed-rate mortgage hit 5.54% last week, nearly double its level a year earlier.

The government reported Tuesday that sales of new single-family homes fell 8% last month from May and 17% from June 2021. And sales of previously occupied homes dropped in June for a fifth straight month. They’re down more than 14% from June 2021.

In response to the rapidly slowing home market, builders are cutting back. Construction of single-family homes dropped last month to its lowest level since March 2020, at the height of pandemic lockdowns.

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The third and final look at the performance of the gross domestic product, the nation’s total output of goods and services, was higher than last month’s estimate of 2.1% growth.

The new-found strength came primarily from stronger consumer spending than what was previously thought, as well as businesses rebuilding their inventories more than initial estimates revealed.

The 2.3% third quarter gain follows explosive growth that began the year as the country was emerging from the pandemic, at least economically. Growth soared to 6.3% in the first quarter and 6.7% in the second quarter. The emergence of the delta variant in the summer was blamed for much of the third quarter slowdown.

Now with the appearance of the omicron variant, coming on top of high inflation and lingering supply chain issues, there are concerns that growth could be constrained heading into 2022.

Those fears have sent the stock market on a turbulent ride in recent days, although new optimism that the omicron risks will be manageable sent the Dow Jones industrial average up 560 points Tuesday.

On Wednesday, President Joe Biden convened a meeting of his supply chain disruptions task force virtually and in-person in Washington, where he touted what he said was significant progress in alleviating bottlenecks at the ports and other issues that had created shortages of goods and contributed to higher prices for consumers.

Biden said that retail inventories are up 3% from last year and on-shelf availability for products is at 90%, close to where it was before the pandemic.

“Packages are moving. Gifts are being delivered. Shelves are not empty,” Biden said.

Still, it is what is unknown that is of concern to many economists, who say it is far too early to declare an all-clear on the threats posed by the new variant.

“History is repeating itself with the COVID virus suddenly reappearing and dampening economic growth prospects,” said Sung Won Sohn, an economics and business professor Loyola Marymount University in Los Angeles.

Oxford Economics has trimmed its forecast for economic growth for the current quarter from 7.8% to 7.3%, which would still represent a sizable rebound from the third-quarter slowdown.

After Sen. Joe Manchin voiced opposition to his party’s spending plans, Goldman Sachs cut its GDP forecast to 2% from 3% for the first quarter, 3% from 3.5% for the second quarter, and 2.75% from 3% in third quarter.

Kathy Bostjancic, chief U.S. financial economist for Oxford, said the firm’s current assessment was that the resurgence of COVID-19 could reduce growth next year from 4.3% to 4.1% and that if Biden’s Build Back Better program is completely derailed, that could likely shave another 0.4 percentage points in 2022, lowering it to around 3.7% and chop a half-point from growth in 2023, reducing it to below 2%.

She said under these assumptions, job growth could be 750,000 lower by this time next year if economic growth slows as much as she fears.

“Omicron has been so rampant,” Bostjancic said. “We think it is going to take a pretty big toll on economic activity.”

And it is not just the resurgence of COVID that could hold the economy back next year. Inflation has spiked to the highest level in nearly four decades, prompting the Federal Reserve to start pulling back the massive amounts of support it has been providing to the economy as it switches from trying to boost job growth to fighting inflation.

Economists expect GDP growth this year to come in around 5.5%, which would be the best showing since 1984 and a reversal from last year when the economy shrank by 3.4% and the global pandemic erased 22 million jobs early in the year.

Wednesday’s report showed that consumer spending, which accounts for two-thirds of economic activity in the U.S., grew at a 2% rate in the third quarter, down from the 12% surge in the April-June quarter, but up from last month’s estimated quarterly gain of 1.7%.

It is the uncertainty of what is to come, however, that is now concerning economists.

“The omicron variant poses a downside risk in the near term as do supply-chain disruptions and shortages that could be a constraint for households and businesses over coming months,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. _____ AP writer Alexandra Jaffe contributed.

MARTIN CRUTSINGER | AP News

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BALTIMORE (AP) — The Biden administration is relying on infrastructure dollars to help fix the clogged ports and blanket the nation with internet access — but a series of initiatives rolled out on Tuesday show that the urgent pace might not be fast enough to address the immediate needs of an economy coping with a supply chain squeeze and a shift to remote work.

President Joe Biden spoke with the CEOs of Wal-Mart, Target, UPS and FedEx on Tuesday about how to relieve the supply chain challenges as ships are still waiting to dock at some of the country’s leading ports. The key problem is that these ports are experiencing record volumes of shipping containers as the economy has recovered from the pandemic.

Biden received updates from the CEOs on how deliveries are being sped up to ensure that store shelves will be well-stocked this holiday season, according to a White House official. Bloomberg News first reported Biden’s conversations with the corporate leaders.

Yet the concrete policy steps being discussed by the administration show that there is no quick fix to supply chain issues that are still hurting smaller businesses and causing consumers to face higher prices. Nor can the administration build out a national broadband network fast enough as more Americans are pivoting toward remote work.

Commerce Secretary Gina Raimondo highlighted at the White House briefing the $65 billion for broadband access in the the $1 trillion infrastructure package that cleared the House on Friday. She said that jobs would be created and poorer Americans would receive “affordable” internet service, though she did not spell out a precise dollar amount on what the monthly bills could be.

The plan involves careful logistics that would take time to implement. Each state would receive at least $100 million to help lay fiberoptic cables and ensure its citizens can access the internet. This process would occur as jobseekers are increasingly requesting remote work where they can work from home on their computers.

“The president wants us to get it right,” Raimondo said. “And if it takes a little longer to lay the groundwork for fiber and broadband, then we’re going to do that.”

Similarly, the administration announced plans on Tuesday to identify and pay for possible upgrades to U.S. ports within the next 90 days — hoping to ultimately tamp down the inflation being caused by ships waiting to dock and a shortage of truck drivers to haul goods.

As the U.S. emerges from the coronavirus pandemic, the economic recovery has been hampered by congested and aging ports. The mix of inflation and the potential for empty store shelves during holiday shopping has created a sense of frustration for many Americans and hurt President Joe Biden and Democrats politically.

Senior administration officials said Tuesday that the Transportation Department would allow port authorities to redirect any leftover money from grant projects to address the supply chain issues. For example, the Georgia Ports Authority will use $8 million to convert its inland facilities for the port of Savannah into container yards, freeing up dock space and speeding the flow of goods to their final destinations.

The officials spoke on condition of anonymity to discuss the forthcoming plans, which come on the heels of the House backing the bipartisan infrastructure package late Friday. The package includes $17 billion to improve coastal and land-based ports that can help to tackle the challenges in the longer term.

Biden’s team is moving straight ahead in promoting the possible benefits from the broader infrastructure package, though they’ve largely shied away from claiming that Americans could see clear and demonstrable changes to their lives before the 2022 midterm elections. The focus, instead, has been on how the spending on roads, bridges and broadband will help the U.S. economy compete against the rest of the world.

The president in remarks to Democratic supporters on Tuesday signaled that he will look to remind voters in the months ahead of the infrastructure win. He noted “the last president” promised to pursue legislation but failed to deliver.

“So it was left to us,” Biden said at the virtual event hosted by the Democratic National Committee. “We got the job done.”

Administration officials said the ports initiatives being announced Tuesday would make the supply chain faster, more efficient and environmentally friendly in the medium to longer term.

Biden will highlight the administration’s efforts by visiting Baltimore’s port on Wednesday. It’s part of a broader effort to show that the administration will tackle the inflation that has left Americans feeling more pessimistic about the economy. Updated figures for the consumer price index will be released Wednesday, with the previous report showing prices were 5.4% higher than a year ago.

The Baltimore trip is designed to highlight the types of investments that the administration believes will help unclog the supply chain. The port in Baltimore is adding container cranes and adding a 50-foot berth where ships can be unloaded. The administration has also approved grants so that the Howard Street Tunnel — a train artery that opened in 1895 — can be expanded to ferry double-stacked containers on railcars.

The Biden administration earlier helped broker an agreement to increase the hours of operation at the Port of Los Angeles, but it’s been difficult to immediately fix this challenge.

Additional steps include launching a $240 million grant program in the next 45 days to modernize ports and marine highways. Within 60 days, the government wants to identify repair projects and opportunities to deepen harbors for larger ships that can be a guide for more than $4 billion in construction by the Army Corps of Engineers.

The government will also look over the next 90 days at which ports of entry should be upgraded and expanded as part of a $3.4 billion investment. It also plans within 90 days to open the first round of more than $475 million in grants for ports made possible through the newly passed infrastructure package.

The Transportation Department intends to publish a playbook for states on freight movement and issue guidance on best practices, so that the value of the infrastructure investments can be maximized. There will also be a request for information by the Transportation Department to improve data collection and sharing to improve the efficiency and transparency of the supply chain.

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President Donald Trump said Tuesday he is hoping the United States will be reopened by Easter as he weighs how to relax nationwide social-distancing guidelines to put some workers back on the job during the coronavirus outbreak.

Trump’s optimism contradicted the warnings of some public health officials who called for stricter — not looser — restrictions on public interactions. But federal officials suggested that advisories could be loosened in areas not experiencing widespread infection.

With lives and the economy hanging in the balance, Trump said he was already looking toward easing the advisories that have sidelined workers, shuttered schools and led to a widespread economic slowdown.

“I would love to have the country opened up and just raring to go by Easter,” he said during a Fox News virtual town hall. Easter is just over two weeks away — Apr. 12.

“Wouldn’t it be great to have all of the churches full?” Trump said in a subsequent interview. “You’ll have packed churches all over our country.”

And as scientists warned the worst is yet to come — with hospital systems tested beyond their capacity and health workers sidelined by exposure — Trump addressed the nation, saying he was beginning “to see the light at the end of the tunnel.”

Trump’s comments came even as White House officials urged people who have left New York City amid the outbreak to self-quarantine for 14 days after their departure, owing to the widespread rate of infection in the metro area. It also follows on the president encouraging lawmakers on Capitol Hill to pass a roughly $2 trillion stimulus package — estimated at roughly $6 trillion once the Federal Reserve’s actions are included — to ease the financial pain for Americans and hard-hit industries.

Health experts have made clear that unless Americans continue to dramatically limit social interaction — staying home from work and isolating themselves — the number of infections will overwhelm the health care system, as it has in parts of Italy, leading to many more deaths. While the worst outbreaks are concentrated in certain parts of the country, such as New York, experts warn that the highly infectious disease is certain to spread.

The U.S. is now more than a week into an unprecedented 15-day effort to encourage all Americans to drastically scale back their public activities. The guidelines, issued by the Centers for Disease Control and Prevention, are voluntary, but many state and local leaders have issued mandatory restrictions in line with, or even tighter than, those issued by the CDC.

On Monday, the U.S. saw its biggest jump yet in the death toll from the virus, with more than 650 American deaths now attributed to COVID-19. Trump’s comments come after dire warnings by officials in hard-hit areas. New York. Gov. Andrew Cuomo said his state’s hospital system will soon hit a breaking point — resulting in avoidable deaths — even with the restrictions already in place.

“I gave it two weeks,” Trump said during the town hall from the Rose Garden. He argued that tens of thousands of Americans die each year from the seasonal flu and in automobile accidents and “we don’t turn the country off.”

When the 15-day period ends next Monday, he said, “We’ll assess at that time and we’ll give it some more time if we need a little more time, but we need to open this country up.” He added, “We have to go back to work, much sooner than people thought.”

Trump’s Easter target was not immediately embraced by Dr. Deborah Birx, the coordinator for the White House task force, who indicated any move would have to be guided by data still being collected. She suggested that public health professionals could recommend a general easing, while pushing for local restrictions to remain in the hardest-hit areas.

Trump acknowledged that some want the guidance to continue, but claimed without providing evidence that keeping the guidance in place would lead to deaths from suicide and depression.

“This cure is worse than the problem,” Trump said.

During a press briefing Tuesday evening, Trump said public health officials and economists were “working to develop a sophisticated plan to open the economy as soon as the time is right — based on the best science, the best modeling and the best medical research there is anywhere on earth.”

Trump’s enthusiasm for getting people back to work comes as he takes stock of the political toll the outbreak is taking. It sets up a potential conflict with medical professionals, including many within his government, who have called for more social restrictions to slow the spread of the virus, not fewer.

Dr. Anthony Fauci, the nation’s leading expert on infectious diseases and a member of the White House’s coronavirus task force, did not appear at the virtual town hall, but Trump denied there were any tensions between the two men.

“I will be guided very much by Dr. Fauci and Deborah,” Trump said.

At the press briefing later, Fauci said, “No one is going to want to tone down anything when you see what is going on in a place like New York City.” But he suggested he would be willing to examine the potential for easing the CDC advisories in areas that have been less affected by the outbreak.

Larry Kudlow, Trump’s top economic adviser, told reporters Tuesday that “public health includes economic health.”

“That’s the key point. And it’s not either-or. It’s not either-or, and that’s why we’re taking a fresh look at it,” he said.

During a private conference call with roughly 30 conservative leaders on Tuesday, Vice President Mike Pence reinforced Trump’s eagerness to lift coronavirus-related work and travel restrictions “in a matter of weeks, not months.”

When pressed on a specific timeline for lifting restrictions, Pence said there would be no formal decisions made until the current 15-day period of social distancing was complete, according to a conference call participant who spoke on the condition of anonymity to share details of the private discussion.

Pence told the group that accommodations would need to be made for the highest-risk populations if and when restrictions begin to be lifted.

Despite Trump’s rosy talk, other elements of the government were digging in for the long haul. Top defense and military leaders on Tuesday warned department personnel that the virus problems could extend for eight to 10 weeks, or even into the summer.

Army Gen. Mark Milley, the chairman of the Joint Chiefs of Staff, said during a Defense Department town hall meeting that restrictions could go into late May or June, possibly even July. He said there are a variety of models from other countries, so the exact length of the virus and necessary restrictions are not yet clear.

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