What predictions of a ‘soft landing, no recession’ mean for you

Lucigerma | Istock | Getty Images

Predictions that a recession may be looming for the U.S. economy have so far not come to fruition. Now, some experts are backing off the prediction altogether, including Federal Reserve staff economists.

“What’s out: Mild recession,” states new economic research released by Bank of America this week.

“What’s in: Soft landing, no recession,” the firm’s research declares.

Economists and other experts have been calling for a downturn for a more than a year now, mostly due to high inflation and the steps policymakers have been taking to curb it. Officially, a downturn is defined as defined as a decline in gross domestic product for two consecutive quarters.

As the Federal Reserve has embarked on a series of interest rate hikes to bring inflation down to its 2% target, the concern has been that may tip the economy into a recession.

Inflation has subsided, though it is still above 2%, per the latest government data.

The unemployment rate is still at “near all-time lows,” Bank of America noted. Friday’s jobs report showed the unemployment rate was 3.5% based on new July data, “just above the lowest level since late 1969.”

Unemployment and other factors — growth in economic activity, wage and price pressures in the “right direction” — prompted Bank of America to reassess its previous calls for a mild recession in 2024.

While the firm is weighting those baseline expectations for a soft landing at 45% to 50%, other outcomes are still possible.

“We still think the most likely alternative is a mild recession,” said Michael Gapen, head of U.S. economics at Bank of America, which the firm puts at odds of 35% to 40%.

Meanwhile, the most optimistic outcome, with stronger GDP growth, comes in at 10% to 15%.

Recessions historically tend to be caused by black swan events — unpredictable circumstances that come as a surprise — that are difficult to precisely forecast, noted Mark Hamrick, senior economic analyst at Bankrate.

“I don’t have much confidence at all in the ability to predict the timing of a recession unless there’s an event that’s right in front of us that suggests that one is imminent,” Hamrick said.

More from Personal Finance:
61% of Americans live paycheck to paycheck
How the Fed’s quarter-point interest rate hike affects you
You may be overlooking important target date fund truths

Other experts point to the Federal Reserve’s role in steering the economy.

“When we get a recession, it tends to be because we had a problem with monetary policy,” said William Luther, director of the Sound Money Project at the American Institute for Economic Research.  

As Fed officials target a soft landing for the U.S. economy, several moving factors will continue to affect Americans’ wallets in the coming months.

1. Cooling inflation may not prompt lower prices

People stand at the check-out counter after shopping at a grocery supermarket in Alhambra, California, on July 13, 2022. 

Frederic J. Brown | AFP | Getty Images

2. There may be further moderation in hiring

A sign posted outside a restaurant looking to hire workers in Miami, May 5, 2023.

Joe Raedle | Getty Images News | Getty Images

3. Now is the time to lock in high rates on cash

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Secular Times is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – seculartimes.com. The content will be deleted within 24 hours.

Leave a Comment