Economists are divided on the risk of a U.S. recession. And the jobs data isn’t helping

Are the U.S. economic signs not in danger of falling into recession? Or are they moving inexorably toward one? Are they in fact in one already? 

It took more than one month for the country to be recognized. recorded two successive quarters of economic contractionIt all depends on who you ask. 

Related investing news

‘Get out of these distorted markets’: Mohamed El-Erian on where to invest right now

Elliot Smith

5 hours ago

Steve Hanke, Johns Hopkins University professor of applied economy. believesIn 2023, the U.S. faces a severe recession. Stephen Roach, Yale University agrees it will take a “miracle” for the U.S. to avoid a recession next year — but it won’t be as bad as the downturn of the early 1980s. 

Richard Thaler (Nobel Prize-winning Economist) is still alive. saysHe doesn’t think there is “anything that looks like a recession” right now in the U.S., and he points to recent developments low unemployment, high job vacancies, and the fact that the economy is growing — just not as fast as prices. 

Market participants also have a similar split. 

Charles Schwab chief investment strategist Liz Ann Sonders saysA recession seems more likely right now than a soft landing in the U.S. economic sector, even though it could be a temporary recession that only hits a few areas of the economy. 

Steen Jakobsen is the chief investment officer of Saxo Bank. He stated in an interview with CNBC that the U.S. was not headed for recession in nominal terms even though it’s real.

Recent surveys confirm this split. In late August, a Reuters survey of economists found that the likelihood of a U.S. downturn within a year was 45%. However, most said it would be quick and short. A Bloomberg survey rated the probability of a recession at 47.5%. 

Why is there such a discrepancy in the numbers? It all depends on what you are focusing on, gross domestic product (GDP) or the job market.

U.S. GDP declined by 0.9% year-on-yearIn the second quarter of 2008, the economy contracted by 1.6% and the first quarter respectively. This is consistent with the definition of recession. There were many factors that contributed to this slump in growth. These included falling inventories, government spending and investments. The inflation-adjusted personal income fell as did the savings rates.

The National Bureau of Economic Research declares a U.S. recession, but it is unlikely that they will make any judgments on the time period.

This is what makes it so special different from every other six-month period of negative GDP since 1947There has been continued strength on the job market. 

Friday’s release of the closely watched nonfarm payrolls data in August was highly anticipated. showed nonfarm payrolls increased by 315,000 — a solid rise, but the lowest monthly gain since April 2021.

This was in addition to recent releases that have demonstrated a slowdown in private payroll growthHowever, it is possible to get a much higher rateMore job openings are available than we expected.

William Foster, senior credit officer at Moody’s, said jobs-versus-GDP continued to be the big debate among economic commentators, against a backdrop of the U.S Federal Reserve changing quickly from an accommodative monetary policy — where it adds to the money supply to boost the economy — to a restrictive one, involving interest rate hikes in order to tackle inflation, which hit 8.5% in July.

Foster said by telephone that “We are coming out of an exceptional period which’s never been seen before” to CNBC. 

When making its decision, the National Bureau of Economic Research looks at real income for households, real spending, industrial production and the labor market and unemployment — and those variables aren’t giving clear recession signals, Foster said. 

“The job market, especially in the service sector is still not able to recruit people,” he stated.

Foster pointed out that even after the end of the pandemic, households still spent relatively heavily, but at a slower pace of growth. This was due to the time of saving and investment.

Joseph Stiglitz was however, the economist at the Ambrosetti Forum held in Italy. told CNBCHe expressed concern about the decline in wages that workers experienced despite a tight labor market.

While commentators may disagree about which indicators should be emphasized, they are split as to what specific sectors are showing.

Peter Boockvar is an investor saysThe latest housing data and manufacturing data show that the U.S. cannot avoid a recession. dropping into negative territory in August.

Jakobsen of Saxo Bank says that there are still double-digit rent market increases. This isn’t going to cause a recession.

Simply put, people can have sufficient money to purchase an apartment or rent it out to make between 20 and 30%. It’s that simple. [a recession]It is unlikely to occur.”

Alexander Nutzenadel is a professor of socio-economic history at Humboldt University of Berlin.

“We live in a period of multiple shocks – from Covid 19 over energy prices to political deglobalization – which make predictions extremely difficult,” he told CNBC by email. 

The economic performance in a country like the United States is heavily dependent on external factors. 

The current situation of “stagflation” — when high inflation and economic stagnation occur simultaneously — is historically rare, he continued, though not completely unprecedented. 

“We experienced a similar situation in the 1970s. But, from these experiences we have learned that monetary policies face enormous challenges to strike the right balance between fighting inflation as well as preventing a crisis.

He also noted that economics has become more varied in recent years.

Utilizadel stated that there is now no “mainstream economics” and all things are controversial.

Recently, some have questioned whether the National Bureau of Economic Research can declare a recession. Tomas Philipson of the University of Chicago is an expert in public policy studies. recently asking“Why should we allow an academic committee to decide?” The objective definition should be the final word, and not the opinions of academic committees.

Philipson said that in any event, it doesn’t matter if paychecks don’t reach as far. It doesn’t matter what you call it.

— CNBC’s Jeff Cox contributed to this report.