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The United States has been grappling with an economic crisis for several months, which is fueling fears of recession among populations.

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 “huge” 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.

Meanwhile, Nobel laureate in economics Richard Thaler sees “anything that resembles a recession” in the United States right now.

Thaler backed his belief with high vacancies, 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 US is not headed into a recession theoretically, even if it is in real terms.

Furthermore, recent polls reflect diverging views.

Mixed signals

The US GDP fell 0.9% yoy in the second quarter and 1.6% in the first, respecting the traditional definition of a recession.

The slowdown in growth was caused by factors such as public spending, declining inventories, and investments.

In addition, inflation-adjusted personal income and savings rates have fallen.

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

It is unlikely that the Bureau will pronounce on the period in question for some time.

The labor market has stronger fundamentals than other six-month periods of negative GDP since 1947.

William Foster, chief credit officer at Moody’s, said the jobs-to-GDP ratio remains the hottest topic of discussion among economic commentators.

This comes as the Fed shifts 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,” Foster said.

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.

Indicators

Despite the economic climate, Foster pointed out that households were still spending a lot.

However, he pointed out that they were spending at a slower rate 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 split on which metrics to focus on and which specific sectors to watch.

Peter Boockbar, an investor, says the latest housing and manufacturing data explain why the United States will not be able to avoid a recession.

He pointed out that the National Association of Home Builders/Wells Fargo housing 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