2023 Recession Outlook: Economists Growing Less Confident
Examining the Shifting Confidence in the Arrival of the 2023 Recession and Positive Economic Expansion Forecasts
It appears that some economists, including those from Wells Fargo, Goldman Sachs, Capital Economics, and Bank of America, are revising their outlook on the possibility of a recession in 2023. These economists are becoming less confident about the occurrence of a recession and are pushing back their expectations for an economic contraction.
Wells Fargo's economists noted that despite the expected effects of monetary tightening and tighter credit availability, recent economic data indicates that the economy is more resilient than anticipated. As a result, they have revised their forecast for the start of a recession to the first quarter of 2024.
Goldman Sachs also lowered its odds of a recession in 2023 from 35% to 25%. Capital Economics indicated that they plan to delay their third-quarter recession prediction, and Bank of America's chief economist mentioned the increasing possibility of a "soft landing" or a mild recession. Additionally, Goldman Sachs' COO mentioned a case for no recession at all.
It's important to note that economic forecasts are subject to change based on evolving data and circumstances. The opinions of economists can vary, and the outlook for the economy remains a topic of ongoing analysis and discussion.
Resilient US Economy: Strong Job Growth, Robust Consumer Spending, and Continued GDP Expansion
The US economy is showing positive signs of resilience and growth. The labor market experienced a substantial increase in jobs in May, with 339,000 jobs added, marking the largest monthly gain since January. Job openings in April also surpassed expectations. Despite persistent inflation, consumer spending remains strong, indicating confidence in the economy. The Atlanta Fed projects a 2.2% growth in the second quarter, which would extend the streak of GDP expansion for the fourth consecutive quarter. Capital Economics no longer anticipates a recession in the third quarter and believes it will take longer for a significant downturn in the labor market to occur.
Data Analysis:
1. Job Growth: The addition of 339,000 jobs in May indicates a strong rebound in the labor market. This increase suggests that businesses are expanding and hiring workers, contributing to economic growth.
2. Job Openings: Surpassing expectations, the higher-than-anticipated job openings in April reflect a favorable environment for job seekers. It indicates that businesses have a demand for labor, further supporting the positive outlook for the labor market.
3. Consumer Spending: Despite sticky inflation, consumer spending remains robust. This suggests that individuals have confidence in the economy and are willing to spend, which can contribute to overall economic growth.
4. GDP Expansion: The projected 2.2% growth in the second quarter by the Atlanta Fed indicates continued economic expansion. This would mark the fourth consecutive quarter of GDP growth, indicating sustained positive momentum in the economy.
5. Recession Outlook: The optimistic view from Capital Economics suggests that a recession in the near term is unlikely. They revised their previous expectations and now anticipate a longer timeframe for a significant downturn in the labor market. This further reinforces the positive outlook for the economy.
Federal Reserve's Interest Rate Hikes Spark Debate on Hard vs. Soft Landing Scenarios for the Economy
The ongoing debate centers around the potential outcome of the Federal Reserve's aggressive interest rate hike campaign, which is the most significant in 40 years. There are concerns that these rate hikes could result in either a "hard landing," characterized by a severe recession and significant unemployment, or a "soft landing," where the economy experiences only a mild slowdown. Bank of America (BofA) and Gapen project a "mild recession," aligning with the concept of a soft landing. The likelihood of a soft landing has increased recently due to the moderation of credit fallout from the Silicon Valley Bank collapse and the resolution of the debt ceiling debate in Washington. However, the situation continues to be monitored, and further analysis is needed to determine the ultimate outcome.
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