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.
- 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.