Is the U.S. about to be socked by a recession?
It depends on whom you ask. And the day of the week.
Fifty-four percent of economists at companies and trade groups put the odds of a downturn in the next 12 months at 50% or less. Forty-four percent say there’s a better than even chance of a slump, according to a survey conducted April 4-12 by the National Association of Business Economics.
That marks a reversal from NABE’s January poll of a similar group that found 54% viewing a recession within 12 months as probable.
Their somewhat brighter outlook is likely tied to improved sales at their companies, says Ken Simonson, a NABE analyst and the chief economist at Associated General Contractors, a trade group for the construction industry.
Forty-six percent of the economists surveyed reported rising sales at their firms over the past three months and just 17% cited falling sales. In January, 38% pointed to rising sales and 30% said business was dropping. The economists likely reckon that an upturn in their companies’ revenue signals stronger growth in the economy overall, Simonson says.
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Also, he says, “Inflation has eased, employment is still growing.” And supply chain bottlenecks that sparked product shortages have improved significantly, he says.
The businesses surveyed are NABE members and include manufacturers and service companies.
Is the economy good right now?
The poll was conducted after the Labor Department reported that employers added 236,000 jobs in March, a historically strong total but a notable slowdown from early in the year.
The survey, however, came after news that retail sales and industrial production both declined in March, developments that led some economists to see a downturn as growing more likely.
That more dour outlook was already gaining traction after last month’s Silicon Valley Bank crisis led banks to make loans harder to obtain for consumers and businesses.
Simonson says he doesn’t think the more recent reports on retail sales and manufacturing would have changed the outlook of the NABE experts.
Are job opportunities increasing or decreasing?
Still, the survey paints a decidedly mixed picture of the economy.
Just 15% of the economists said employment increased at their companies during the last three months, the smallest share since October 2020. And just 15% expect employment to rise over the next three months – the second lowest portion since April 2020 — while 19% expect payrolls to fall.
Those numbers are consistent with an economy that could well shed jobs in coming months, Simonson says, and job losses often correlate with recession.
It’s possible that most of the economists still foresee a downturn but believe it will happen later than expected, beyond the 12-month horizon specified in the survey, he says.
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Why is the Fed increasing interest rates?
The fuzzy outlook depicted in the poll reflects a recession that has been predicted since early 2022 but repeatedly gets pushed back. The Federal Reserve has been aggressively hiking interest rates over the past year in an effort to weaken the economy enough to curtail a pandemic-related inflation spike, a campaign that’s expected to tip the economy into a slide. Although inflation has abated, it remains too high and the Fed expects to raise rates at least once more.
But while the economy has slowed, it hasn’t gone south. Employers have been reluctant to lay off workers amid longstanding labor shortages. And consumers have relied on rising wages and savings from COVID-related stimulus checks to cope with both inflation and higher interest rates.
But those COVID savings are dwindling. Households racked up a record $180.3 billion in credit card debt last year, according to WalletHub, and delinquencies are up sharply.
Joseph LaVorgna, chief economist of SMBC Nikko Securities, believes a recession is still coming; it’s just taking longer to arrive.
“It feels like a ‘slowcession,’” LaVorgna wrote in a note to clients. “The economy is bending but not yet breaking.”
