Image source: Omfif

For several months, the United States has been grappling with an economic crisis that is fueling fears of recession among the population.

The country has also recorded two consecutive quarters of economic contraction, leading many to wonder if the United States is already in recession.

What the experts say

Many commented on the situation and offered different perspectives.

Steve Hanke, a professor of applied economics at Johns Hopkins University, believes the country will be heading for a “whopper” recession in 2023.

Stephen Roach of Yale University agrees that the country would need a miracle to avoid a recession in 2023, but he thinks it won’t be the depth of the recession of the early 1980s.

Richard Thaler, a Nobel laureate in economics, currently doesn’t see “anything that resembles a recession” in the United States.

Thaler based his belief on high vacancy rates, a growing economy, and low unemployment.

Liz Ann Sonders, chief investment strategist at Charles Schwab, says a recession is more likely than a soft landing for the economy.

However, it may take a spinning recession to hit the pocket economy.

Steen Jakobsen, chief investment officer of Saxo Bank, said the United States is not theoretically heading into a recession, even if it is in real terms. Moreover, recent polls reflect different views.

Read also: Teamster could stir a union strike against UPS

Mixed signals

US GDP fell 0.9% year-on-year in the second quarter and 1.6% in the first, consistent with the traditional definition of a recession.

The slowdown in growth was caused by factors such as government spending, falling inventories, and investment.

In addition, inflation-adjusted personal income and the savings rate have declined.

In the United States, the National Bureau of Economic Research officially announces whether the country is in recession.

It is unlikely that the Bureau will issue a preliminary ruling on the period in question.

The labor market has firmer fundamentals than other half-yearly periods of negative GDP since 1947.

William Foster, Moody’s chief credit officer, said the job-to-GDP ratio remains the most talked about topic among economic commentators.

This is because the Fed is shifting from an accommodative monetary policy to a tightening policy that includes rate hikes to fight inflation, which hit 8.5% in July.

“We’re coming out of an extraordinary period that’s not been seen before in history,” said Foster.

He also said the National Bureau of Economic Research was looking at real household income, real spending, industrial production, the labor market, and unemployment—factors that do not indicate signs of a recession.

“The jobs market is still struggling to hire people, particularly in the services sector,” said Foster.

Read also: Economist Paul Krugman Waves Possibility of Recession Off and Slams the Media for Its Negative Bias

Indicators

Despite the economic climate, Foster pointed out that households are still spending big.

However, he pointed out that they were spending at a slower pace of growth, made possible by household savings thanks to the pandemic.

Economist Joseph Stiglitz has expressed concern about falling real wages workers are experiencing despite the tight labor market.

Commentators are divided on which metrics to focus on and which specific sectors to pay attention to.

Peter Boockbar, an investor, says the latest housing and manufacturing data explain why the US cannot avoid a recession.

He pointed out that the National Association of Home Builders/Wells Fargo real estate market index fell into negative territory last month.

However, Saxo Bank’s Jakobsen responded to the claims by saying:

“We still have double digit increases in the rental market. This is not going to create a recession.”

“Simply, people have enough money on the balance sheet to buy an apartment and rent it out and make 20 to 30%,” he added. “So [a recession] is not going to happen.”

Reference:

Economists are divided on the risk of a US recession. And the jobs data isn’t helping