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Possibility of U.S. Recession Starts to Fall

Possibility of U.S. Recession Starts to Fall

By RZR News Team
Jul 28, 2023

Fast Facts

Analysis

As the possibility of a recession looms, it is vital to take an objective look at the situation without partisan bias. While some may attribute any potential economic downturn to the Biden administration’s policies, in reality, larger macroeconomic factors and an ongoing unstable economy are the primary drivers of a said “improvement.”

The global economic landscape is shaped by numerous interconnected variables, many of which are beyond the control of any single administration. The COVID-19 pandemic, for instance, continues to impact supply chains, consumer behavior and labor markets, leading to economic uncertainties worldwide. It is vital to recognize that President Biden inherited an economy already on the upswing following the aftershocks of a historic global crisis.

Additionally, the Federal Reserve’s monetary policies and interest rate decisions play a significant role in shaping the economic trajectory. While President Biden’s fiscal proposals may have some influence, the ultimate impact is contingent on the alignment of these policies with the broader economic conditions.

The possibility of a recession declining is not solely the result of Biden’s policies but rather a culmination of larger macroeconomic factors and the lingering, but abating, effects of the pandemic. Policymakers should adopt pragmatic approaches to steer the economy toward recovery and stability, emphasizing the need for evidence-based decision-making – not choices based on social progressivism. 

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There has been speculation for some time now and the reason is that the Federal Reserve was effectively going to great lengths to squash inflation by raising interest rates in order to slow down the economy. Businesses would lay off workers and U.S. citizens would cut spending, which would lead to a lack of investment in the economy. Many CEOs, investors and economists had predicted that 2023 was the year a recession would occur. 

It seems as though the chances of that happening is slimming down. Despite the failure of three U.S. banks and the ongoing general concern with the financial institutions, a recession may not be upon us, at least not now. The Federal Reserve issued seven interest rate increases last year and three as of now in 2023. Additionally, some companies have cut jobs and the number has quadrupled, especially in tech and media industries, the economic indicators suggest many people who are laid off are quickly getting rehired. According to Joe Brusuelas, chief economist at RSM, as long as the economy produces at least 200,000 jobs a month there is no need to worry about a recession.

The U.S. quite impressively has shown some resilience however, we cannot be complete sheep about what might happen in the near future. Everything that is being said about the recession is only as of now not too long ago, a recession was predicted and only recently has there been a shift of that possibility so the chances of a recession happening should not be completely ruled out. Recessions can be delayed, hot job markets halt triggering one. So, there’s always the need to account for the Fed’s war on inflation hitting the economy with a lag. This means that we may not have been impacted by the highly aggressive interest rate hikes as of yet and perhaps it is accurate that we may not face a recession this year we will have to see by next year.

– Briauna B

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It is safe to say that the falling possibility of a recession in the United States of America is a good sign for the economy and its consumers. This decrease in possibility could bring the prices of consumer goods back to a stable and affordable cost among other things.

According to Goldman Sachs, the possibility of a recession in the next 12 months has decreased by 5%. It was originally a 25% chance, but it is now a 20% chance. While other publications are recording that we are at a high chance of a recession in the next 12 months, it becomes a situation where each economist has to defend their claim and have supporting evidence to side with them given the significant differences of projection.

Statista completely refutes Goldman Sachs’s claim believing that there is a 67% chance that the United States will fall into a recession in the next 12 months. While the issue with inflation somewhat supports this claim, it mainly seems like the projections of these various economists think that the possibility of another recession can go either way.

With the number of articles saying that the chances of a recession are both high and low, it can be difficult to differentiate between the right projection and the wrong projection. In addition to this issue, it can further highlight the trepidation of a consumer when it comes to trying to figure out which way the economy is headed. This uncertainty might be present until consumers experience an America 12 months from now.

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Depression, panic and recession; are all terms used by the government to sugarcoat a struggling economy and in some cases lack of jobs. It’s July 2023, and most Americans are starting to feel a release (but not a total slackening) of the grip of inflation that has been occurring in the country during the Biden administration. 

In an effort to curb inflation, the Federal Reserve started raising interest rates, in theory, to stimulate businesses to stop hiring and start firing, and Americans would cut their spending. Now let’s discuss why Adam Smith just rolled over in his grave upon the writing of this last sentence.

2023 was thought by investors, CEOs and economists to be a year of economic doom. Conversely, May 2023 saw 339,000 jobs added to the market, a higher number of jobs added since 2019, one of the strongest job market years in recent history. Adam Smith at this time would roll his eyes and state the obvious: one does not control the market or its behavior, the market does that on its own. 

Therefore Smith would likely be very careful to throw the R-word (recession) around as casually as it is today by most people. Smith would be right in this thinking as well, but before patting him on the back, let’s look at the how and why of an Adam Smith analysis of recessions. 

First, what is a recession? Strictly speaking, it’s a significant decline in economic activity in a region that can last months or even years. The prelude to a recession tends to come in the form of less Gross Domestic Product which consequently creates less jobs, and therefore less consumerism. In a very broad nutshell, this is what happened with the housing crisis of 2008

Of course, there are other factors that could be cited, like wars (Ukraine) or the elephant in the room, COVID-19. However, you could look at economic debt, high interest rates, lack of consumer confidence, and even inflation, among other things. The astute reader will note two of those things just listed have happened in the last few years, and may ask “ok, but then why hasn’t there been a recession?” 

This is a valid question, the short answer and the reason we can pat Adam Smith on the back: these are only indicators, not necessarily surefire signs. The market is an entity all to itself, one that I, you or even Smith himself can never truly predict in terms of what it will do next. That being said, the housing market is still cooling, and in theory, there still could be a recession, but it appears the probability is steadily decreasing as the world reemerges from COVID-19 protocol.

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