RALEIGH – The U.S. economy is very clearly not currently in a recession. At least, not based on the latest data on third quarter gross domestic product which was released by the Bureau of Economic Analysis on Thursday morning.
That’s according to Dr. Michael Walden, an economist and a William Neal Reynolds Distinguished Professor and Extension Economist at North Carolina State University, who spoke with WRAL TechWire on Thursday
“We are now not in a recession, and we haven’t been,” said Walden. “In particular, the labor market has continued to improve, and we now see output is increasing again after a pause in the first and second quarters.”
In the Triangle, though the labor market has shown signs in recent weeks that indicate a mixed up jobs market, there are still tens of thousands of jobs available. And, despite North Carolina’s unemployment rate increasing last month, the labor markets across the state are still faring better than a year ago in many ways.
Of course, many workers may still be concerned about layoffs and some have speculated that the economy was headed for the first “full employment recession” on record. Perhaps those concerns may be assuaged with the latest economic news indicating that the country is not in and will not enter a recession.
A month ago, Ned Davis Research reported that the probability of a U.S. recession was 98.1%.
Jobs quandary: We may have first full employment recession, economist says
What will the Federal Reserve do?
There’s also another way to interpret the latest GDP figures, said Walden.
While it could be suggested that the Federal Reserve has thus far successfully navigated the U.S. economy into the so-called “soft landing” by increasing interest rates multiple times in recent months, allowing the central bank to slowly lower rates again in the months to come, the opposite could still occur, as well, said Walden.
“I do think we saw the peak of inflation in the summer, and I forecast inflation will rise at a slower pace in upcoming months,” said Walden. “If the Fed’s policies result in a soft landing, it will be a major accomplishment.”
But, of course, there will be other economists, and perhaps even members of the Federal Reserve Board of Governors who will see the latest report on U.S. GDP as motivation for the central bank to continue tightening the economy by again raising interest rates in November and potentially again in December, as many have expected.
“Usually in a fight against inflation, GDP declines,” Walden noted. “Hence, an alternative analysis is the Fed’s policies haven’t yet taken hold, implying more interest rate hikes are yet to come.”
The Federal Reserve meets next week. According to the CME FedWatch Tool, the probability that the Federal Reserve will again raise interest rates by 75 basis points is now 91.8%.
That’s lower than a week ago, when the probability of another 75-basis point hike was 98.4%, and a slight decrease from yesterday, when the probability was 92.5%, according to the CME FedWatch Tool.
Exec: Fed rate hikes have pushed US economy into ‘danger zone’
