Two top economists said that despite contrary predictions, a recession will likely hit the United States in the near future.
“Some economists argue that the strength of the labor market—as well as household balance sheets—will keep the economy strong enough to avoid a recession,” wrote Lakshman Achuthan and Anirvan Banerji, the co-founders of the Economic Cycle Research Institute, in a Friday opinion article. “We disagree,” they wrote, saying that “it remains our expectation that the U.S. economy will enter a recession this year.”
That’s because, in part, because of the Federal Reserve’s recent decisions to raise interest rates to their highest levels in decades in a bid to slow inflation levels not seen since the early 1980s, they wrote. The rate hike appears to have worked to an extent as the Labor Department last week confirmed that the consumer price index that measures inflation fell 0.1 percent in December to 6.5 percent.
Last month, the Federal Reserve raised its benchmark interest rates by half a percentage point, while the last four hikes were all three-quarters of a percentage point.
“Recessions always entail noticeable declines in both GDP and jobs, but such pullbacks are not necessarily obvious at the recession’s outset,” the two wrote for CNN, telling Americans “don’t be fooled” by rosy forecasts saying otherwise. “While GDP and jobs do move in step with the economy, by the time they are released, they only tell us where the economy had been in the recent past.”
There have been similarities made to the current U.S. economy and the 2008 Great Recession, they wrote.
“Then, many—including then-President George W. Bush—were not concerned about a recession because GDP hadn’t declined yet, even though job losses had begun,” their article said. “We pushed back against the prevailing complacency, writing for CNN at the time, ‘While GDP has yet to decline, we have already seen four straight months of payroll job losses. That suggests that the economy is on a recession track. And it implies that either one or both of the recent, slightly positive GDP estimates will be revised down to negative readings by next year.’”
