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  • Writer's pictureAmi Kassar

AmiSight 6/16: Still Wondering When the Recession Is Starting?

A recent Wall Street Journal article talks about the elusive recession.


The article discusses the current state of the U.S. economy and the potential for a recession despite the Federal Reserve's efforts to raise interest rates to curb inflation. Contrary to expectations, the economy has remained resilient, with employers hiring aggressively, consumers spending freely, the stock market rebounding, and the housing market stabilizing.


The lingering effects of the pandemic, such as pent-up demand and government policies like low interest rates and financial assistance, have fueled consumer spending and business growth. Economists initially expected the Fed's rate increases to cool the economy and lead to a recession, but the data so far indicates a stronger economy than anticipated.


The labor market is recovering, with robust job gains and increasing wages. Job openings have exceeded the number of unemployed Americans, leading to wage growth. Despite the pandemic-induced drop in the labor force, the job market remains tight. Consumers have significant savings, estimated at around $500 billion, allowing them to spend on travel, concerts, and other activities even as prices rise.


The article highlights the surprising strength of economic activity and inflation, complicating the Federal Reserve's rate outlook. However, there are indications that higher rates are starting to impact the economy. Businesses have slowed their investments and reduced equipment spending. The average workweek has also declined, possibly due to businesses cutting hours instead of workers. The unemployment rate rose slightly, and the information sector experienced job losses.


Many economists and business executives believe that it is only a matter of time before the impact of interest rate increases becomes more pronounced and affects the economy's strength. Economists surveyed earlier in the year predicted a higher probability of a recession in the next 12 months, but despite ongoing concerns, a recession does not appear imminent.


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