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- The US isn’t in a recession at the moment according to different kinds of data.
- The labor market in the country is still thriving, as seen in monthly nonfarm payroll gains.
- Real personal income less transfers has also seen monthly gains again after declining.
You can’t go far without hearing someone talking about a recession.
The debate whether the US will see a recession, or even if it’s experiencing one now, is almost everywhere.
“I do think this is a more uncertain and more hotly contested question than perhaps ever in American history,” Julia Pollak, chief economist at ZipRecruiter, told Insider when asked whether she thinks the US is in a recession and if not yet, whether this will be the case in 2023 or if the US can avoid it.
But robust monthly payroll gains along with other economic data points suggest that the US isn’t in a recession right now, and a plethora of economists and experts agree.
The National Bureau of Economic Research’s Business Cycle Dating Committee, the semi-official arbiter of determining when recessions begin and end, hasn’t said that the US is in a recession. However, the debate and concerns about what a recession could look like and if the US will enter one soon is hot.
CEOs and other leaders have talked about a potential recession. Scott Kirby, CEO of United Airlines, told CNBC that there could be a “mild recession induced by the Fed.” David Solomon, CEO of Goldman Sachs, said at The Wall Street Journal’s CEO Council Summit that there’s “a very, very reasonable possibility that we could have a recession of some kind.”
US Treasury Secretary Janet Yellen also talked about a recession next year on 60 Minutes. “There’s a risk of a recession,” Yellen said. “But it certainly isn’t, in my view, something that is necessary to bring inflation down.”
Economists that Insider talked to agree that the US isn’t in a recession just yet, so we looked at the data ourselves to see how the economy is doing and when a recession might appear.
First, let’s look at the data
The NBER’s “traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
“The committee’s view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another,” per the site.
NBER considers a wide range of economic indicators when determining a recession, and as will be seen below, most of those continue to show signs of a robust economy. The team of economists doesn’t follow a hard and fast rule for dating downturns, however.
“There is no fixed rule about what measures contribute information to the process or how they are weighted in our decisions,” NBER says about deciding peak and trough dates.
Looking at US payrolls, there has been robust growth. Gains have been strong throughout 2022, even getting back to the pre-pandemic employment level this past summer. Based on preliminary data, 263,000 jobs were added in November, more than economists expected.
Monthly payroll growth as reported by businesses and other employers has slowed compared to earlier this year. Nevertheless, the labor market doesn’t indicate a recession right now.
“I think if you look at all the data from the labor market, it does not suggest that we are currently in an economic downturn,” Nick Bunker, economic research director at Indeed Hiring Lab, told Insider. “That, of course, could change.”
Outside of monthly payroll changes, US job openings have been high, with 1.7 openings per unemployed person as of October. Places are still hiring even as some industries like tech lay off workers. The unemployment rate increased in October from 3.5% to 3.7% but is still relatively low. The rate was also 3.7% in November.
“The reason we’re not in a recession is that the labor market still is performing very well in the US economy,” Ken Kim, a senior economist at KPMG, told Insider. “So people are still finding jobs and getting a paycheck and spending it on goods and services.”
Real personal income excluding payments from the government has been increasing, with four straight months of gains after falling earlier this year. And real personal consumption expenditures continued to climb as seen in the below chart, showing consumers are still spending.
With about two-thirds of GDP being consumer spending, Pollak said “it’s hard to see a recession” because of strong consumption and real income growth.
Strong consumer spending can also be seen in retail sales. A measure of retail trade and food services sales was 6.5% higher in November than a year ago without adjusting for inflation. Looking at inflation-adjusted figures, sales in November held steady since January 2022 and below sales in November 2021.
“Gains in employment, gains in industrial production, gains in income levels, strong nominal sales figures — none of that stuff sounds particularly recessionary to me,” Jack Manley, a global market strategist at JPMorgan Asset Management, told Insider.
Manley did note some drags on growth, including the housing market that has slowed and saying “net exports continuing to narrow.”
Here’s what experts are saying about a recession in 2023
Some Wall Street experts and economists think the US could avoid a recession next year, and that even if one comes, it will likely not be as severe as the downturns after the 2008 financial crisis and the early Covid pandemic.
Goldman Sachs Research suggests a chance that the US just “narrowly” avoids a recession. And according to JPMorgan Asset Management, a “near-term recession is too close to call” although the report states if there’s a recession in 2023, it likely will be mild. The report adds “lower inflation and slower growth over the next few years seem very likely.”
As Insider’s Brian Evans reported, economists at Bank of America think there will be a mild recession too.
“Following the Fed’s recent 50bps rate hike, our BofA economists remain cautious on the US economy, and continue to expect a mild recession starting in 1Q23 with negative US GDP for 2023,” a Bank of America note said.
Fitch also thinks a recession could happen some time next year, although later than what Bank of America economists said.
“Fitch expects the U.S. economy to enter genuine recession territory — albeit relatively mild by historical standards — in 2Q23,” Olu Sonola, head of US regional economics at Fitch Ratings, said in a statement.
Kim said KPMG Economics thinks there will be a mild recession with unemployment hitting around 5.5% some time next year, well above the current 3.7% but far below the near-15% unemployment in the Covid recession and 10% peak after the 2008 financial crisis.
And a mild recession may also be brief.
“Using the Global Financial Crisis as a benchmark, that was a nasty six quarter recession in length, a year and a half, which is awfully long,” Kim said. “So we’re not looking for that type of severe recession.”
While some think a recession is on the horizon, there’s a chance that the US may not enter one at all.
“I don’t think anyone knows whether we’re going to have a recession or not,” Fed Chair Jerome Powell said. “And if we do, whether it’s going to be a deep one or not, it’s just, it’s not knowable.”
Bunker, who thinks we’re not in a recession, doesn’t have a forecast as to when a recession could happen. He is watching labor market data closely.
“I think we would need to see a significant deterioration in the labor market for me to think we’re in a recession, and we have not seen any significant deterioration yet,” Bunker said.
Manley said that “while there certainly are a whole lot of drags on this economy, there are a lot of things going right too,” adding “it’s too hard to call” if and when the US will be in a recession. Manley added though that we are in a slowdown and that will continue in 2023.
“And that given the lack of imbalances in the economy, given the enormous demand for labor that’s out there, even if we do get a recession in 2023, it should be mild, should be mellow, should be technical in nature,” Manley said, “very different from what we experienced in 2020, very different from what we experienced back in 2008.”
This article will be regularly updated with the latest economic data and recession forecasts.