Biden admin believes the US economy can still achieve ‘soft landing’

close video It’s ‘amazing’ economy has remained ‘resilient’: Quincy Krosby

LPL Financial chief global strategist Quincy Krosby argues the Federal Reserve is ‘on the path out of’ inflation.

Heading into the new year, the Biden administration believes the U.S. economy can still achieve a"soft landing."

Supporting theories that the large-scale government investments will help boost the labor market in the months and years ahead, a top adviser to the president told the Financial Times. 

Those comments are from Heather Boushey, a member of the White House council of economic advisers.

The stand by the White House comes as many economists fear a significant slowdown and possibly a recession is on the horizon as the Federal Reserve continues to aggressively raise interest rates to fight inflation.

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Heather Boushey of the White House Council of Economic Advisors (CHANDAN KHANNA/AFP via Getty Images) / Getty Images)

Fed officials projected this month that the U.S. would narrowly avoid a contraction in 2023, with output increasing by just 0.5%. U.S. central bankers expect the nation’s unemployment rate to rise from 3.7% in November to 4.6% by the end of next year.

That would result in the likely loss of tens of thousands of jobs. 

A series of laws passed by Congress and signed by the president during his first two years in office had created "funding streams" for infrastructure, clean energy and semiconductor manufacturing that would help blunt any downturn for the "real economy," according to Boushey.

U.S. Federal Reserve Chair Jerome Powell. ((Photo by Liu Jie/Xinhua via Getty Images) / Getty Images)

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She admits there are "challenges" and "unforeseen things," ranging from Covid-19 to the war in Ukraine, but that the recent legislation would be "pushing in the other direction".

"We remain optimistic that we will be able to see the soft landing that we are looking for," she said, adding: "Time will tell, but I think the pieces are in place to have a fighting chance to do so." 

Boushey pointed to the employment situation as a positive with average job gains in the last three months of 272,000.

U.S. President Joe Biden signs into law H.R. 5376, the Inflation Reduction Act of 2022. (Photo by Demetrius Freeman/The Washington Post via Getty Images / Getty Images)

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The legislation that will support the labor market are the Bipartisan Infrastructure Law, the Chips and Science Act and the Inflation Reduction Act, according to Boushey.

While inflation has show signs of easing, it remains at a level Fed officials deem far too high. 

This year, the Fed raised its benchmark interest rate from near zero to a target range of 4.25-4.50%. Most officials see it rising above 5% next year and staying there at least until 2024.