July 19, 2023 — A skydiver jumps out of an airplane, apparently without a working parachute. On the way down, a passing hang-glider calls out to ask how he is doing.  The plummeting man shouts back “Okay, so far!”

For many, the US economy resembles the skydiver.  But they are probably wrong.

1. Expectations of a hard landing

Many think a hard landing became inevitable when the Fed in March 2022 began a series of interest rate hikes, which totals 5.0 percentage points so far and is expected to continue. Many economists, as well as the public, have been confidently predicting a recession for over a year now, or even saying that it has already begun.  In June 2022, 57% of respondents told pollsters that they believed the US was already in recession, versus only 21% who did not.  An inverted yield curve in bond markets suggests that the financial sector, too, has been expecting a downturn.  The word “recession” appeared far more often in public media during the last year than is usual even in the midst of a true recession. read more

A shorter version of this commentary appeared in Barron’s magazine, June 8, 2022. For a video interview, see BNN/Bloomberg, June 8.

June 9, 2022 — US consumer sentiment, by one measure, is at its lowest level since 2011. More Americans say they hear mostly negative news about the economy than hear positive news, or a balance of positive and negative.  Most remarkably, 57% tell pollsters they believe we are currently in recession versus only 21% who do not.

So, is the US economy already in a recession?  No.  People are unhappy with inflation, which has recently been running 8.3 % [CPI change, from April 2021 to April 2022].  That is the highest since 1982.  But inflation is not recession. Recession is defined as a significant decline in economic activity.  Economic activity is not falling. Quite the contrary: it has been booming.  It is worth spelling out the evidence. read more