New analysis raises questions about America's 'missing recession'

25 January 2023

Since the COVID-19 pandemic, there have been looming concerns about the possibility of America falling into a deep recession. Over the past six months, those concerns have escalated. However, a new analysis argues that those financial predictions have fallen short.

New Statesman's Will Dunn began his analysis with a brief recap of concerns expressed by CEOs of some of the country's top corporations.

"In June last year Jamie Dimon, the chief executive of JP Morgan, America’s (and the world’s) largest bank, warned that an economic 'hurricane' was 'right out there, down the road, coming our way,'" Dunn wrote, adding, "Other CEOs and analysts agreed; Elon Musk, who was at that point still considered a capable user of money, had a 'super bad feeling' about the US economy."

Despite the verbalized concerns, the country's economy and workforce have continued to thrive.

"However, economic activity in the US remained strong: GDP grew by 3.2 percent in the third quarter of 2022, and in December employment increased by 223,000," he pointed out.

Dunn went on to note some of the contradictory aspects also plaguing the economy despite the country's economic growth.

"At the same time, some of the classic indicators of impending recession remain in place," he wrote. "Investors in financial markets are still charging more to lend America money in the short term than the long term (the “yield curve” on US government bonds is “inverted”), a situation that has been an accurate predictor of every recession in America for more than 50 years. "

Dunn also posed a question about what he describes as America's "missing recession."

He continued, "And the underlying fact is that the US, like other countries, is enduring high inflation, which its central bank is trying to tame with higher interest rates. Where, then, is America’s missing recession – and will it ever show up?"

Speaking to Dunn, Stephen Miran, a former advisor for the U.S. Treasury Department, offered insight on the perplexing economic dynamic as he insisted that there are signs of a possible downturn in there despite the current economic state.

“Economists like to say that housing is the business cycle,” Miran explained. “So, when you get a swing of 10 percent of employment in that sector, which is very possible if you have a big collapse in housing demand, that’s easily 800,000 jobs.” With every one of those newly unemployed people spending less, each lay-off adds more “demand loss” to the economy, compounding the effect: “You could easily get two to three million jobs lost from the downturn in housing. That’s a real recession.”

Read the full story at The New Statesman (subscription required).

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