This may come across as a hot take, but despite the gloom and doom broadcasted, the data appears to support that the current economic climate in the United States is looking favorable. Despite inflation, America teetering on the brink of its debt ceiling, and the numerous layoffs in tech industries, the reality is the vast majority of workers have kept their jobs despite this. According to the Bureau of Labour Statistics, the number of people applying for unemployment benefits dropped to a record of 186,000 last week. Unemployment has remained at its 50-year low of 3.5%, and despite the layoffs, there’s currently 10.5 million open jobs right now.
Still, many economic experts predict a significant downturn in the near future. A recession that may present itself differently from past ones in the United States.
According to Gregory Daco, senior economist at Ernst and Young’s EY-Parthenon consultancy firm, the features of this downturn are likely to be distinct from earlier ones. He mentioned two factors: the continued strength of the labor market and the current situation of consumers’ wallets, which includes high savings rates and low debt.
There has not been the “kind of significant slowdown we generally see at the outset of a recession, where corporations attempt to cut expenses immediately,” he said. “That means the correction is likely less severe and more protracted than in the previous. Across-the-board layoffs are not in the cards.”
Then how are we still sliding into a recession?
Daco stated that consumer expenditures looked to have peaked a few months ago. Additionally, individuals have started working shorter hours, and manufacturing has slowed.
Therefore, as Daco put it, “across the market, there are increasing signals that business is slowing down considerably,” which is almost always the precursor to a recession.
This can be a bit of a relief (for the time being), especially for those who’ve suffered through the last economic recession. This is significant because it suggests the economy is experiencing a “soft landing.” The fast inflation we saw over the summer has been settled somewhat and the jobless rate has not rivaled the increase. Obviously, this doesn’t mean things are good for everyone, but the fact that the numbers show people holding steady is a positive sign.
Officials from the Federal Reserve have restated that lowering inflation — which hit a high of 9% annually last summer — is the primary goal. It’s been almost a year since the Federal Reserve aggressively raised interest rates to combat rising inflation and while it wasn’t pleasant it may be in part what’s slowed the economic descent.
Is inflation going to get worse?
Unfortunately, inflation is becoming more difficult to predict, but many economists claim we’re en route to stick the “soft landing.” It’s challenging when there are myriad factors and the US is currently center stage on a global platform. While the first half of this year is still expected to be subject to a mild recession, it’s possible the latter half sees improvements.