Is the US on the verge of a recession?
Depends on who you ask. And the day of the week.
Fifty-four percent of economists at companies and trade groups put the probability of a fall in the next 12 months at 50% or less. Forty-four percent say there is a better than even chance of falling, according to a survey conducted on April 4-12 of National Association of Business Economics.
That marked a return from NABE January poll a similar group saw 54% view a recession within 12 months as likely.
Their somewhat brighter outlook is likely related to improved sales at their companies, said Ken Simonson, a NABE analyst and the chief economist at Associated General Contractors, a trade group for the construction industry.
Forty-six percent of economists surveyed reported rising sales at their companies in the past three months and only 17% cited falling sales. In January, 38% cited rising sales and 30% said business was declining. Economists tend to hope that an increase in their companies’ profits indicates stronger growth in the economy overall, Simonson said.
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Also, he said, “Inflation is down, employment is still growing.” And supply chain bottlenecks that caused product shortages have improved significantly, he said.
The businesses surveyed are NABE members and include manufacturers and service companies.
Is the economy good right now?
The poll was conducted after the Labor Department reported that employers added 236,000 jobs in March, a historically large total but a marked slowdown from earlier in the year.
The survey, however, came after news that retail sales and industrial production both declined in March, developments that led some economists to see a downturn as growing more likely.
That bleaker outlook is already gaining traction after last month’s Silicon Valley Bank crisis led banks to make loans harder to get for consumers and businesses.
Simonson said he doesn’t think the more recent retail sales and manufacturing reports will change NABE experts’ view.
Are job opportunities increasing or decreasing?
However, the survey paints a decidedly mixed picture of the economy.
Just 15% of economists said employment at their companies increased in the past three months, the smallest share since October 2020. And just 15% expect employment to increase in the next three months – the second lowest share since April 2020 – while 19% expect payrolls to fall.
Those numbers are consistent with an economy that could lose jobs in the coming months, Simonson said, and job losses are often associated with recessions.
It’s possible that most economists still predict a downturn but believe it will happen later than expected, beyond the 12-month horizon specified in the survey, he said.
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Why is the Fed raising interest rates?
The bleak outlook depicted in the poll reflects a recession that has been predicted since early 2022 but has been repeatedly pushed back. The Federal Reserve has been aggressively raising interest rates over the past year in an effort to weaken the economy enough to reduce the spike in inflation linked to the pandemic, a campaign expected to dent the economy. Although inflation has eased, it remains too high and the Fed is expected to raise rates at least one more time.
But while the economy has slowed, it hasn’t gone south. Employers are reluctant to lay off workers amid chronic labor shortages. And consumers relied on rising wages and savings from the COVID-related stimulus checks to offset both inflation and higher interest rates.
But the COVID savings are shrinking. Households racked up a record $180.3 billion in credit card debt last year, according to WalletHub, and delinquencies have skyrocketed.
Joseph LaVorgna, chief economist of SMBC Nikko Securities, believes the recession is still coming; just took longer to arrive.
“It’s like ‘slowcession,'” LaVorgna wrote in a note to clients. “The economy is crooked but not yet collapsing.”