Find out why Americans and economists are concerned.
According to a recent survey conducted by CNBC and investing app Acorns, 81 percent of Americans believe the U.S. economy will likely experience a recession in 2022. This rising sentiment could have been caused by any number of events taking place in the world right now, from rising oil prices to the inflation we’re seeing in everyday household products. It also likely has to do with the general sense of global instability that so many feel right now, thanks to a multi-year pandemic and an unfolding economic and humanitarian crisis in Ukraine.
At the same time, paradoxically, the economy seems to be doing well from other angles. Per The New York Times, employers are collectively adding hundreds of thousands of jobs every month, wages are rising, and consumers are spending.
In short: the economy seems to be holding its own, in spite of rising concerns over inflation. So why are economists warning of a recession?
Why inflation is causing concern among economists
If you’re trying to understand all this speculation about a potential recession, the biggest piece of evidence to consider is the rampant inflation taking place across the country right now.
In a Deutsche Bank report released this week, a team of economists led by Matthew Luzzetti warned that the Federal Reserve will cause a recession in its effort to fight this inflation. Luzzetti and others wrote, “We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession.”
So what is a soft landing, exactly? According to The New York Times, it’s a term used to describe what the Federal Reserve would try to do in response to inflation: Slow down the economy without driving unemployment or causing a recession.
Here is what the economists at Deutsche Bank predict will happen, per CNN: a “mild recession” will take place this year, with unemployment rising to 5 percent by 2024. This recession will slow inflation, they say, so that it will fall to “the Fed’s 2% objective by 2025.”
Is a recession guaranteed to happen in 2022?
There might be signs that the United States is heading for a recession. But other economists are arguing just as fiercely to pay attention to signs that the United States won’t see a recession any time soon.
One of these positive economic signs is job growth. As CNBC notes, the job market in the United States has seen stunning growth over the last year, with record employment numbers and hourly wages rising for workers in lower-paying jobs. Aneta Markowska, chief economist for Jefferies, an investment bank, argued to The New York Times that this job growth, along with the continued hiring efforts by companies across the country, should serve as a cushion for any economic downturn that comes from inflation or high oil prices.
Markowska said, “I just don’t see what would cause businesses to do a complete 180 and go from ‘We need to hire all these people and we can’t find them’ to ‘We have to lay people off.'”
One important fact to consider is that it’s entirely possible for our economy to slow down without actually falling into a recession. In fact, it might be a good sign if the economy does exactly that: slow down. Another economist who spoke to The New York Times argued exactly this point. Josh Bivens, the director of research at the Economic Policy Institute, said to the publication, “We have torn back toward normal at a really fast pace, and it would be unrealistic to think that could continue.”
