The windchill factor is a measure of how much colder it feels outside when the wind is blowing. Accounting for the windchill factor is important because the colder the air temperature and the more aggressive the wind, the greater the risk of frostbite. Similarly, the more aggressive the Fed’s tightening, a cold wind, the more likely it is to cause a recession.

The Fed’s tightening has not yet caused the U.S. economy to freeze up, a warm economic breeze is still blowing. We have had three quarters of positive real GDP growth, and the Atlanta Fed estimates a 1.77% gain for this quarter. The unemployment rate is a historically low 3.7%, and job openings remain surprisingly robust. Consumers are still recovering from the pandemic, spending their excess savings on travel and especially services. Income growth is solid, and consumer debt service payments are only 9.6% of disposable income. Fiscal spending remains a strong counterweight to the Fed’s tightening and will continue to support growth by injecting hundreds of billions of dollars into the economy. The stock market has been strong for the last nine months, boosting consumer confidence and spending. The “windchill factors” illustrated on the following pages may have a profound effect on the current U.S. economy.