The US Economy Managed to Dodge Recession in 2023, But is Headed Towards it This Year

I was asked what I thought abut recession. I thought about it and decided not to take part. - Sam Watton

As UK and Japan have slipped into recession, a similar trend is slated to hit the US economy in mid-2024. Although the country avoided last year's slip while the European Union and New Zealand failed to dodge it in 2023, experts now believe that the country can slide into mild recession or 'soft landing' anytime in these coming 12 months. Despite the threat of recession, American companies are still working in the hiring mode and disbursing funds indicating that they are prepared to tackle a slowdown. At the same time, JP Morgan recently forecasted the country's economic decline despite their improved inflation prices and growth strategies.

Insights on an American recession

As per David Rosenberg's research on a model that indicates the economic finances of a country, there is an 85% chance that the US might face a recession this year. He called this indicator the 'full model' which is wholly based on the National Bureau of Economic Research paper demonstrating several financial metrics. David convincingly says the number out loud as the model exhibited one of the highest percentages since the 2008 Great Financial Crisis.

Rosenberg further mentioned why he resorted to this model instead of others and said that this model raises timely recession alarms and none of them have turned out to be fake. He then disclosed the 2023 readings of the model which suggested 12% recession chances with the yield-curve indicator showing 50%. Rosenberg then said that the United States economy survived last year but this year's forecast is clearly pointing towards a 'soft landing' situation. This occurs when the economy prices are decelerated just to keep the inflated prices at a minimum Federal Reserve's goal of 2%.

Exploring past precedents

According to the data and findings of the NBER (National Bureau of Economic Research), the United States have till now endured 34 recessions with some being two months long to others staying for even five years. The 'Own Goal Recession' which lasted for 13 months saw a 10% GDP decline and was named as “the recession within the Depression” back then. It occurred just when the country was recovering from the Great Depression and was considered the third most deadliest recession of the 20th century. There was a list of slowdowns that came until November 2001 and later in December 2007, the US was again hit by a devastating economic decline that lasted for 18 months. This resulted in a GDP fall of 4.3% and the unemployment rate peaked at 9.5%. The primary reason behind 'The Great Recession' was the hiked-up housing prices and the crumble of the mortgage market leading to a credit crunch.

The United States recently faced economic turbulence during COVID-19 when everyone was fighting to save their citizens' lives. The COVID-19 recession lasted for two months and the unemployment rate jumped to 14.7% in 2020 but bounced back by 4% in 2022. Majorly, the country experienced a sudden but striking recession due to the pandemic restrictions including the travel and work ones that the government levied. These changes resulted in a lot of people losing their jobs. thereby affecting the country's economy and thus the recession.