As higher inflation and interest rates take a bigger bite out of your bank account, the likelihood of a recession in 2024 remains to be seen. Southeast Missouri State University economist David Yaskewich said there’s a lot of uncertainties and some concerns heading into next year.
“Right now, it doesn’t look like we’re going to see a recession, definitely not in the year 2023. I think the risk of recession in 2024 looks lower than it did at the beginning of this year. But again, there still are these uncertainties,” he said. “We’re not out of the woods yet, because we have not seen inflation go back to its historical norm and interest rates do remain high.”
Yaskewich said time is key.
“The harder it is to bring inflation back to the 2% goal that the Federal Reserve has set, the longer that takes, I think, the risk of a recession would increase,” he said.
How does federal spending impact inflation?
“It’s a concern but it’s not as directly impact as what we’re seeing with monetary policy,” said Yaskewich. “If the United States continues to accumulate more debt,
that could be problematic, but it’d be more problematic if the ability to sell treasury bonds would be questioned. So, if our credit rating were to be tarnished, or if foreign investors became less interested in our debt, that would be very problematic for the United States and could have inflationary impacts. Right now, that would have a minimal impact on the inflation we’ve seen in the last year. What we’re seeing now right now, we’re seeing a stronger connection between monetary policy and interest rate policy by the Federal Reserve than what we’re seeing happening in Washington with Congress right now.”
According to Yaskewich, parts of the economy are fairly strong, particularly the labor market, but he’s uncertain how long it will last.
“When we were at the worst of the labor shortage, it would have been around April of 2022, and a common number that would be reported that for every unemployed person, there were two job vacancies. Today, that number is more like for every one unemployed person, there’s like one-and-a-half job vacancies. It doesn’t sound like a big change when phrased like that, but it actually is a big difference if you look at the actual numbers on an aggregate basis,” said Yaskewich.
He also pointed out that people are quitting their jobs at a much lower rate today than they did during the dawn of the pandemic.
“The quits rate has declined in the last year-and-a-half. So at the peak of this Great Resignation, we would have seen roughly 4 million people quit their jobs each month nationally, and about 3% of the total who are employed quit their jobs. That’s fallen substantially since then,” he said. “Now we’re about 3.4 to 3.5 million people quitting their jobs each month. Again, if you look at this on an aggregate basis over the course of 12 months, that’s a pretty considerable decline.”
He said the housing, construction, and auto industries have had some struggles in this economy.
Yaskewich said the U.S. economy has a stronger growth rate compared to other parts of the world, including western Europe and Asia.
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