President Joe Biden says “there’s nothing inevitable” about a recession in the U.S. He is an increasingly lonely voice about that prospect.
Price spikes and the Fed’s aggressive interest rate hikes sent the benchmark S&P 500 stock index tumbling to its worst performance in the first half of the year since 1970. Consumer confidence has sunk to record lows. And economists are increasingly worried that a downturn will not only happen but happen soon — a danger underscored by one widely watched Fed growth tracker.
Americans are already pessimistic about the economy even as unemployment sits at 3.6 percent — near modern-era lows — and a contracting economy would deepen the pain, bringing a wave of layoffs and pay cuts. “The mood could get a lot more sour,” said Bivens, who argues that if the economy contracts, that would mean the Fed has screwed up by going too far in trying to curb surging prices.
Dana Peterson, the chief economist at The Conference Board, a business research group, said she anticipates a “brief yet shallow” recession starting in the last three months of the year. But other factors could worsen the situation: if housing prices start to take a nosedive or if the war in Ukraine intensifies, sending oil and food prices even higher.
Still, many of the factors contributing to shrinking GDP in recent months are technical in nature — companies stocked up on a lot of goods for their back rooms and so aren’t adding as much to that inventory — leading many economists to question whether it’s really a recession without the economic pain of notable job losses.
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