By Howard Schneider

WASHINGTON, (Reuters) – Fears that war in Ukraine could cause a slump in the U.S. economic growth have given way to indications that Americans will continue to travel, return to restaurants and make a gradual, albeit incomplete, return to the “normal” state of affairs.

Major gaps remain in the economy after the pandemic. The downtown office buildings remain underutilized in one of the most persistent changes. This may have been because workers and employers realized that many jobs can be done at home. Businesses still face difficulties finding supplies and hiring workers during a period of record-breaking job openings.

However, after an extremely difficult winter, in which war and a new coronavirus spike, as well as high inflation, the recent government and high-frequency data shows that growth is on track.

According to economists polled, Reuters expects the monthly nonfarm payrolls reports to reveal a rise of almost 500,000 jobs and a drop in unemployment to 3.7% in March. Hiring momentum was seen through the end and possibly into April, according to data that is high in frequency from payroll providers UKG or Homebase.

Although gasoline consumption fell in March, as national prices surpassed $4 per gallon, Energy Information Administration data shows that gasoline use is still at 95% pre-pandemic levels. This roughly matches the level it was since 2022.

The pre-pandemic level of air travel has been surpassed by 90%. OpenTable data shows that in-person dining was at 95% on the 15th of March through 30th.

The Federal Reserve has set a target for inflation of 2%, but it is three-fold higher than that. This could mean that consumers get less money. Inflation-adjusted spending data from February revealed that consumption declined and that energy took up a bigger share of household budgets.

However, this drop came following a January spending spike. Fed policymakers and analysts agreed this week that neither the continuing pandemic nor global events have had much impact on the U.S. economic performance.

Analysts from RBC Capital Markets said this week that high gasoline prices had not caused demand destruction. Due to rising wages and the fact that many Americans have saved enough for pandemic aid payments, $4 is a lot of gasoline.The threat of war in Eastern Europe could further fuel inflation. It is currently at an all-time high for four decades. Talk of an aggressive Fed response to price rises fueled talk about a “hard landing”, a period of recession that was triggered by higher interest rates and tighter credit.

A closely-watched part of this week’s bond market showed that there was continued concern over the outcome. The yields for short periods fell below that of 2-year Treasury Notes, a sign that future economic growth is slowing down.

However, the Fed and economists still believe that there are more clear signals in the bond market.

Aneta Marcowska and Thomas Simons, Jefferies analysts, said “It is premature to start counting down the recession.” This does not appear to be a late-cycle economic system. “It’s a middle-cycle economy, and the business cycles has plenty of space to run.”

RUN TO NORMAL

While the Fed isn’t putting a halt to the economy’s growth, its target policy rate (Fed) remains below that which could discourage investment and spending. To offset the negative economic effects from the pandemic, the U.S. central banking raised the federal funds rate 25% on March 16.

Expect interest rates to increase steadily starting from this point. Fed officials are expecting increases of at most a quarter percent at six of their last policy meetings in the year. However, there is the potential for larger increases which could end any Fed support for economic expansion by the end.

Fed policymakers stated this week they will closely monitor the impact of anticipated rate rises on inflation and economic growth. If prices aren’t responding, then we can either increase borrowing costs more quickly or suspend them when it is necessary.

They stressed that the economy is resilient, even though companies may struggle to find employees and supply workers at this time, but they are also filling records of demand and securing strong profits and raising wages.

Some measures indicate that the return of normal is imminent. Oren Klachkin from Oxford Economics wrote that Oxford Economics had “retired its weekly economic recovery tracker” because it found data measuring financial conditions and employment levels, as well as other factors, “essentially back to their pre-pandemic levels.”

Economists expect larger changes as part of an economy that is “normalizing”. There are also signs that these bigger changes are starting to manifest.

In February, spending on services increased while goods fell. This is a pattern Fed officials had been anticipating and may help in fighting inflation. During the pandemic consumers bought records number of goods, as service options were restricted by social-distancing regulations and other measures which shuttered many companies. The high demand for automobiles, bicycles, appliances, and other goods met with an insufficient global supply system, leading to rising prices.

Unacast’s foot traffic data showed that visitors to electronic stores and auto dealers, as well as home goods shops, are significantly lower in 2022 than last year. But the hotel sector is recovering rapidly.

Data from Las Vegas Convention and Visitors Authority revealed a significant 18% gap in February overall attendance at the city’s convention and events. This is a sign of the sector’s recovery. However, demand is strong enough that average daily rates have risen by 15% and total revenue per room has fallen to less than 10%.

Even some signs of inflation are beginning to appear,

According to data for February, prices increased year over year but the key indicator of month-to-month inflation dropped one-tenth.

A trend is only a pattern for one month. However, Fed Chair Jerome Powell spoke out at the news conference after the conclusion of March’s policy meeting. He said that this type of month to month decrease was what the Fed wants.