Kremlin Press Office/Handout/Anadolu Agency via Getty Images; Kent Nishimura / Los Angeles Times via Getty Images
Inflation and Russia's war with Ukraine are disrupting the global economy, but the US is likely to withstand it, even as Biden announced a ban on Russian oil on Tuesday.
Oil prices have been creeping upward ever since Russia began threatening to invade Ukraine, with costs surging after Russia made true on its promises at the end of last month. Rising gas prices are hitting Americans at the pump, and the impending ban is likely to make things worse, but otherwise, the economy is likely to remain solid, financial markets reporter Sam Ro explained in his newsletter Friday.
Inflation and the economic consequences of the war might slow growth in the US, Ro said, but those factors probably won't be enough to trigger a recession and undo the gains of the rapid recovery from the pandemic, which is among the most promising the US has ever seen.
Blowout jobs growth, excess savings for Americans, and minimal ties to Russia are likely to keep the US afloat as countries more economically tied to Russia feel the impact of cutting off the Kremlin.
Here are three reasons the US economy is likely to be safe:
The labor market's recovery is historically fast. It continued to beat projections through February, with the US adding 678,000 jobs last month, beating the forecast of 440,000 new payrolls and marking the biggest one-month gain since July of last year. The unemployment rate fell to 3.8% from 4%, also exceeding expectations.
That's better than American recovery after the Great Recession, Insider's Ben Winck reported last week. It's taken just 24 months for the economy to see employment levels 1.4% below pre-pandemic ones, which it took the country 67 months to do following the 2008 financial crisis.
And there's still a lot of room for unemployment to decrease further. According to the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey (JOLTS), there were 10.9 million job openings in the US as of December, or roughly 1.7 job openings per unemployed person.
As Ro notes, even if economic growth slows in the US and some businesses are forced to lay off their employees, employment rates overall are likely to hold steady, as laid-off workers can quickly move into one of the 10.9 million vacant positions.
Ro also notes that American consumers have been accruing extra cash since February 2020, thanks to government assistance like stimulus checks and unemployment payments, as well as limited spending options during the pandemic.
These savings — about $19 trillion in total, according to Bank of America — have more than helped people deal with inflation, which has also been rising over the past year. Ro says that these savings are also expected to blunt the possible effect of more inflation down the road.
"Households in the aggregate have accumulated about $2.6 trillion of 'excess saving' in recent years relative to the pre-pandemic trend, which all else equal could be enough to cover even a sustained 50% surge in oil and natural gas prices for many years to come," Daniel Silver, an economist at JPMorgan, wrote in a February 25 research note.
The International Monetary Fund warned Saturday that Russia's attacks on Ukraine, as well as the growing list of sanctions on Russia, would "have a severe impact on the global economy." But the impact likely won't be felt the same in the US, given the lack of trade between the US and Russia and low oil imports from the country.
The Middle East and North Africa region, for instance, is facing a wheat crisis, as its major producers of it are Russia and Ukraine. The United States produced over a billion bushels of wheat last year, so it doesn't rely as strongly on an overseas suppliers, although it also imports wheat products from Canada, the European Union, and Asia, according to the US Department of Agriculture.
Russia is the third-largest producer of petroleum, behind the US and Saudi Arabia. It exported about 5 million barrels per day of crude oil in 2020, according to the US Energy Information Administration. Nearly half of those exports were to Europe, and 42% went to Asia and Oceania. Those regions will feel the impact of any cutoff in Russia's oil supply much more intensely.
In contrast, the US only imported about 8% of its oil and refined products from Russia in 2021, with most of the US' imported oil coming from Canada, Mexico, and Saudi Arabia. As with wheat, the US makes much of its own oil, producing over 18 million barrels per day, according to US Energy Information Administration.
