What recession? Inflation, GDP offer hope for 'soft landing'
Perhaps a 2023 recession can be avoided after all.
Consistently falling prices alongside a stronger-than-expected fourth-quarter gross domestic product (GDP) and next week's anticipated less aggressive interest rate hike from the
The personal consumption expenditures price index (PCE) cooled to 5 percent annually last month from 5.5 percent in November,
The day before, data came down showing that the
The positive numbers have some economists chiding market commentators for being overly pessimistic in their characterizations of the economy over the course of 2022, a year in which many Americans believed a recession had already begun.
"Worst. Recession. Ever,"
"There's a lot to be said about these latest GDP data, but I think the thing it underscores is that it's now official: There was no recession in 2022. All that talk, all that energy, all that bluster, was nonsense all along," Wolfers added.
"Many economists have gone way overboard in talking as if a 2023 recession is all but inevitable. I would put the odds of a recession this year at something like 35 percent," Frankel said in an email to The Hill.
The strong
"At this point the burden of proof lies on anyone claiming that we had more than a, well, transitory inflation spike that's mostly behind us," New York Times economics columnist
Former
"With the steady stream of more optimistic data on inflation and a path to a soft landing taking form, it is time for the hawks to explain themselves," she wrote in a weekly newsletter. "Reality shows a 'soft landing' in 2023 in
"It's not just politicians and the press," Dube wrote online Thursday. "Too many public-facing economists have downplayed the recovery over the past two years."
Perhaps the most vocal of those economists has been former Treasury Secretary
During a speech in
"In other words, we need two years of 7.5 percent unemployment or 5 years of 6 percent unemployment, or one year of 10 percent unemployment," he said.
In fact, inflation has been falling even as unemployment has remained around a 50-year low of 3.5 percent, suggesting that price spikes during the pandemic have less to do with the labor market than with other factors including supply shocks and profit maximization tendencies among firms.
The reason that so many of these estimates have been off is outdated modeling and economic thinking, according to investor and founder of Westwood Capital
"The people who have their academic careers and their business forecasting careers based on economic modeling and macroeconomics that grew up from micro-fundamentals over the 30 years from, say, the late 1970s until the end of the century — they're heavily invested in a way of looking at the world that ties into … labor's impact on prices," Alpert told The Hill in an interview.
"But those models don't really apply to a fully fiat world where you really don't have constraints on currency and you've got credit developing through multiple channels and you have massive asset inflation without having a lot of goods and services and wage inflation," he said.
But even amid all the positive data, there are some potential signs that the
Friday's PCE numbers showed a drop of 0.2 percent in consumer spending in December, larger than the 0.1 percent drop in November. The drop in spending was confined mostly to the goods sector.
The Philadelphia Federal Reserve anticipates more sluggish growth in 2023, at a rate of 0.7 percent for the year, as the Fed continues with its program of monetary tightening.
"Overtightening of monetary policy would drive the world economy into an unnecessarily harsh slowdown, an outcome that could be avoided," the
"While it is still too early to determine whether central banks in developed countries, in particular in
Fed can send a big message this week with a small bump in key interest rate
Recession watch: U.S. economy is on shaky ground
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News