Benchmark S&P500 stock index falls to worst performance due to soaring prices and aggressive Fed rate hikes Did. The first half of the year since 1970. Consumer confidence has sunk to record lows. And economists are more and more worried about not only a recession, but an immediate one. This is a danger highlighted by the Fed's growing tracker, which has received widespread attention.
Federal Reserve Chair Jerome Powell began to shout out the quiet part. Central banks are ready to tolerate a recession if it means curbing inflation. "The bigger mistake would be to fail to restore price stability," he said on June 29.
Biden publicly supports Powell's efforts, but rising expectations for a recession have exacerbated the administration's economic woes as the Democratic Party heads for parliamentary elections this year.
"Everyone is screaming about inflation," said Josh Bivens, head of research at the Left Institute for Economic Policy. But "people will really hate recession."
Despite the unemployment rate of 3.6% (close to modern lows), Americans are already pessimistic about the economy. The recession deepens the pain and leads to a wave of layoffs and wage cuts. "The mood can be more sour," Bivens said. He argues that if the economy shrinks, it means the Fed has failed too much in trying to keep prices soaring.
Nationally, high inflation, a major topic of economic conversation, is rapidly changing with increasing certainty of the upcoming recession. The White House allies support it. Republican lawmakers have shouted that a recession is inevitable. Wall Street analysts are increasingly incorporating it into their predictions. And business leaders have made a rapid shift from calm fears to open talk about investor discussions and internal economic downturns.
Some Democrats still point out the bright spots in the economy, saying that central banks will slow growth and lower inflation without putting the country in full-scale recession. I want it. .. Powell says he shares his hopes and points out the continued strength of the economy.
"The recession will really be a problem for Americans,"Jim Himes(D-Conn.) Said in an interview. "Boy, but are we far from recession?"
Whitehouse officials admitted that the economy faces various global risks, but the United States "Strong labor market, personal consumption, business investment) is "better than most other companies," he said. Country – Build a strong economic base and move to steady and stable growth while curbing inflation.
"And we can do so without giving up all the financial benefits we have achieved," officials added.
However, unpredictable questions are looming. Does the US need a recession to curb inflation? How fast And will the Fed continue to raise interest rates even if the country goes into recession until inflation recedes?
Dana Peterson, chief economist at The Conference Board, a business research group, expects a "short but shallow" recession to begin in the last three months of this year. Stated. However, other factors can exacerbate the situation. If house prices begin to skyrocket, or if the war in Ukraine intensifies, oil and food prices will rise even higher. She also said her forecasts assume that some of the infrastructure spending enacted last year will begin to strengthen the economy and mitigate the slowdown.
"If you don't see it, you may see a deeper, longer-term recession," she said at POLITICO's "Women's Rules" event.
JPMorgan Chase Chief US Economist Michael Ferroli said the recession will begin this quarter with recent data showing that consumer spending, the biggest driver of GDP, is starting to slow down. Said there is a possibility.
"Things seem to make us lose altitude fairly quickly," he said.
Last week, the government confirmed that the economy had shrunk in the first three months of the year. And the Atlanta Federal Economic Growth Tracker points out the increased potential for shrinkage in the second quarter.
If that happens, it begins a fierce debate about whether the United States is already in recession. A recession is often defined as two consecutive quarters of negative GDP growth, but it is generally unofficial long after the recession begins until it is confirmed by the National Bureau of Economic Research. .. The Bureau defines a recessionas "a significant decline in economic activity that has spread throughout the economy and lasted for more than a few months." It does not set a specific time frame for consecutive quarters.
Still, many of the factors contributing to the decline in GDP in recent months are technical in nature. Companies stock up on a lot of merchandise in the back room, so they don't add too much to their inventory. Economists question whether it is really a recession without the financial pain of significant unemployment.
White House officials said the fact that the United States has added an average of 400,000 jobs in the last three months is evidence that the economy is not in recession. The June Employment Statistics, due out on Friday, July 8, provide further clues as to the health of the employment market.
Democrat Himes said he thinks the Fed took too long to start raising rates. This is what many Republicans claim, but we believe the US economy can survive the future.
"There is no doubt that growth will slow as a result of the Fed's rising interest rates," he said. "But the unemployment rate of 3.6% is far from the ugly effects of the recession."
There is no guarantee that a recession will actually suffocate inflation, but subsequent unemployment will be priced. It will weaken the kind of personal consumption that is driving the surge. And the Fed's move has already sparked a backlash among some Democrats.
SenatorElizabeth Warren(D-Mass.) Is working aggressively to raise rates to combat inflation caused by events primarily unresolved by the central bank. Claims to be — supply chain obstacles and the Russian war against Ukraine. She said it wouldn't help the price very much and could hurt the economy.
"Inflation is like an illness, and medicines need to be tailored to specific problems, or things can get worse," she said. Told Powell in a hearing. "And for now, the Fed has no control over the main factors behind inflation."
EPI's Bivens said inflation expects inflation to slow naturally for many reasons. Rising food and energy prices reduce people's ability to buy other things, reduce government spending, and slow wage growth. He said the Federal Reserve shouldn't feel the need to trigger a recession to push prices down.
"They seem to be more hawkish than ever, just as they are approaching overkill," Bivens said.
But Charles Caromilis, a professor at the Columbia Business School who was Chief Economist at Banking Regulatory under former President Donald Trump, said more than the federal government is actually burning investors. I'm going to overcome inflation, which warned me that it should cause pain.
The best way to prevent the Federal Reserve from expecting sustained soaring prices is to "willingly have a real recession until inflation is subdued. "Indicate that you are doing".