Opinion | Stop Panicking About the U.S. Economy

When customers resist a price hike and change their buying habits, Walmart knows instantly, based on minute-by-minute data from its 4,735 U.S. stores, and can cut prices accordingly. The world’s largest brick-and-mortar retailer by revenue is cutting prices at a time when inflation is roaring. Even the biggest retailers lack the power to pass higher costs along to customers, who are addicted to 30 years of low prices. Such resistance to inflation is at work at my pricey butcher shop in Brooklyn, N.Y., where the owner says he charges customers only a portion of his higher costs to avoid losing their business. This helped him survive two years of lockdowns without laying off any of his 20 employees.

Another sign inflation could be coming down: Though the Federal Reserve frets about consumers’ inflation expectations, the bond markets already are predicting the Fed will start trimming rates less than a year from now.

There are other reasons for optimism. Consumers’ spending less elsewhere to pay for higher-priced gas has anti-inflationary effects. There is less excess cash for movies, jet skis and new cars.

Auto makers have large inventories of vehicles that haven’t made it to showrooms because of chip shortages—General Motors alone has almost 100,000. When those cars are ready, steep price cuts will move them and provide another anti-inflationary force.

Even the outlook for oil prices is better. Crude was at $72 a barrel a year ago and now is at $97, up 35%—but down 17% since March. The U.S. energy sector can turn itself back on and become the world’s No. 1 producer in short order, given a new administration. Energy prices can go back down, big time.

The Federal Reserve looks at job contraction as a key indicator of a recession. Yet we keep hearing about a shortage of labor rather than a shortage of jobs. The U.S. has more vacant jobs (11.3 million) than unemployed people looking to fill them (5.9 million). The unemployment rate has been at a meager 3.6% for four months.

That is in part owing to trillions of dollars in Covid handouts from the federal government. U.S. households had $4.2 trillion more cash at the end of last year compared with 2019, rising to a total $14.7 trillion. That’s up 44%, and those in the bottom half of income saw their cash increase by 70% to 80% in the same period.

Another boost: Of $5.7 trillion in “fiscal support” that Congress enacted since 2020, as of late January, $800 billion was still to be paid out. Money allocated is never returned unspent.

In general, consumers can dodge a lot of inflation. They can skip the rib eye and trade down to hamburger and chicken. My monthly rent is unchanged; your mortgage payment stays the same. Those looking to make big purchases, like cars, can put them off a bit.

We will be fine and so will the U.S. economy, the strongest and most resilient in the world. The much-feared recession is oversold. You can bet on it.

Mr. Kneale is a writer based in New York.