U.S. May Avoid a Recession in 2023

The drumbeat of warnings that a recession is approaching continues, but fears of one hitting the United States in 2023 are beginning to fade. There is evidence the economy is improving, and the U.S. may avoid a significant downturn after all.

Business Insider quotes Moody’s Analytics chief economist Mark Zandi, who says, “Inflation is on its back heels.” According to Zandi, moderating inflation makes it less likely for the Fed to implement rate hikes, which in Zandi’s view, “significantly raises the odds that the economy can navigate through without a recession in 2023.”

Positive signs include a declining Consumer Price Index (CPI), which dropped six months in a row through December, signaling weakening inflation. Then there’s the job market, which remains strong. Here’s more from Business Insider:

At the same time, the US labor market has looked at the possibility of a recession and essentially shrugged. Workers still feel comfortable leaving their jobs at near-record rates, and the layoff rate is still near the record low. The US added 223,000 payrolls in December, well above the 200,000 jobs forecast by economists Bloomberg surveyed — and the unemployment rate came down to 3.5%, below the 3.7% forecast…

Good news regarding jobs continued Thursday, reports BI, with unemployment claims dropping sharply at the end of December.

Other economists agree with Mark Zandi’s positive take. BI quotes ZipRecruiter’s lead economist, Sinem Buber, who wrote in a Thursday statement that considering CPI data along “with recent labor market indicators” shows an increased “likelihood of a soft landing.”

The head of the Federal Reserve, Jerome Powell, previously indicated he was uncertain about a 2023 economic downturn. Continued positive developments, however, will make it possible for the Fed to maintain its ultimate objective of price stability, keeping a recession at bay.