Former Treasury Department economist David Beckworth says there are a number of signals in Mornings with Mary that point to a slowdown in the US economy.
The overwhelming majority of economists expect the economy to plunge into recession next year as the Federal Reserve fights inflation, according to a new poll.
According to the findings of the Federal Association of Business Administration (NABE), 72 percent of economists expect an economic downturn by the middle of next year – or believe that the economy is already in such a state.
About 20% of respondents said they believe the economy is already in recession. Another 20% do not expect a downturn before the second half of next year.
“The poll results reflect many divided opinions among the panelists,” NABE President David Altig said in a statement. “This alone suggests the outlook is less clear than usual.”
IS THE UNITED STATES GOING INTO A RECESSION?
Gasoline prices are listed at a gas station in Los Angeles, California on July 19, 2022. (Frederic J. BrownAFP via Getty Images/Getty Images)
198 members of NABE were interviewed for the survey, which was conducted between August 1st and 9th.
There is a growing consensus on Wall Street that the Federal Reserve will trigger a recession as it fights inflation with a series of aggressive rate hikes. Policymakers approved the second straight 75 basis point rate hike in July and have indicated that another outsized rate hike is on the table in September depending on upcoming economic data.
Gross domestic product (GDP), the broadest measure of goods and services produced in the country, has already fallen for two consecutive quarters, with the economy contracting 1.6% in January-March and another 0.9% in April-June is .
Technically defined as two consecutive quarters of negative economic growth, recessions are characterized by high unemployment, low or negative GDP growth, falling incomes and declining retail sales, according to the National Bureau of Economic Research (NBER), which tracks downturns.
The decline in economic growth in the second quarter meets the technical but unofficial criteria for a recession, which requires a “significant contraction in economic activity that is sweeping across the economy and lasts longer than a few months.” Still, the NBER – the semi-official referee – might not confirm this immediately, as they typically wait up to a year to call them.
The NBER has also stressed that it relies on more data than GDP to determine if there is a recession, such as unemployment and consumer spending, which remained strong through the first six months of the year. It also takes into account the depth of any contraction in economic activity.
There are conflicting signs of the health of the economy, fueling debate over the state of the economy: the number of Americans filing for unemployment benefits has started to rise, companies have announced layoffs or hiring freezes, and the housing market is faltering.
Federal Reserve Chairman Jerome Powell speaks during a news conference May 4, 2022 in Washington. (Al Drago/Bloomberg via Getty Images/Getty Images)
At the same time, unemployment fell to a near-historic low of 3.5% in July and consumers are still spending heavily despite scorching inflation.
Economists remain divided on whether or not the economy is officially in recession, but they largely agree that avoiding a downturn in the near future will be nearly impossible as the Federal Reserve attempts to tame inflation by cooling the economy control consumer demand.
Rising interest rates tend to result in higher borrowing rates for consumers and businesses, slowing the economy by forcing employers to cut spending. Mortgage rates have nearly doubled in a year, while some credit card issuers have hiked rates to 20%.
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Fed Chair Jerome Powell has said tackling inflation remains the central bank’s top priority, even if it means risking a downturn – although he stressed last month that he doesn’t believe the US is currently in a recession .
“We think there is a need to slow growth,” Powell said in July. “We actually believe we need a period of sub-potential growth to create some slack for the supply side to catch up.”
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