While President Joe Biden continues to remain defiant that we could very well be headed towards a recession, economists say otherwise in a poll from the Wall Street Journal. "Recession Probability Soars as Inflation Worsens," the poll's write-up warns, with the probability of a recession taking place in the next 12 months currently at 44 percent.
The poll's write-up stresses that this number is not good, in that it's "a level usually seen only on the brink of or during actual recessions."
"Since the Journal began asking the question in mid-2005, a 44% recession probability is seldom seen outside of an actual recession," the poll's write-up went on to also note. The 44 percent is even more concerning in comparison to previous numbers. "In December 2007, the month that the 2007-to-2009 recession began, economists assigned a 38% probability. In February 2020, when the last recession began, they assigned a 26% probability."
Also included is a slew of bad news for the Biden Administration, even when it comes to what good news there may be:
Forecasters have raised recession probability due to a number of factors: higher borrowing costs, a blistering pace of inflation, supply-chain problems and commodity-price shocks stemming from the war in Ukraine. Mostly, however, they see dimming chances that a steeper path of rate increases by the Fed can cool inflation without inducing higher unemployment and an economic downturn.
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“We now believe the U.S. economy is headed for a mild recession in the coming months,” said Greg Daco, chief economist for EY-Parthenon, a consulting firm. “While consumers will continue to spend freely on leisure, travel and hospitality over the summer, a persistently elevated inflation backdrop, surging interest rates and plunging stock prices will erode spending power, severely curtail housing activity and constrain business investment and hiring.”
Economists expect unemployment to rise as the Fed raises rates, although they see it staying at relatively low levels by historical comparison. On average, they forecast unemployment rising from 3.6% in May to an average of 3.7% at the end of 2022 and 4.2% at the end of 2023.
One bright spot is that economists still expect the economy to grow this year, although they slashed their growth projection in half in the most recent survey. On average, they see inflation-adjusted gross domestic product rising 1.3% in the fourth quarter of 2022 from a year earlier, down from 2.6% in the April survey. Last year the economy grew 5.5%, the fastest since 1984, following a 2.3% drop in 2020 when the pandemic began.
Recent data suggest the U.S. economy is starting to slow under the combined weight of soaring inflation and climbing interest rates—including the highest mortgage rates since 2008.
The poll was conducted June 16-17, with 53 economists, which the poll noted was "after the Fed voted to sharply raise the benchmark federal-funds rate by 0.75 percentage point to a range between 1.5% and 1.75%." It was released on Sunday morning.
Those in the Biden Administration, including the president himself, continue to mislead the American public when it comes to concerns about this increasingly ever-looming recession.
The Hill, which also covered the results of the Wall Street Journal poll, reported that even after talking with economist Larry Summers, the president is going with the narrative that a recession isn't "inevitable." The president made that same claim during his interview with the Associated Press last Thursday, his first press interview in over 100 days.
Summers had just on Sunday told Chuck Todd on NBC's "Meet the Press" that it was his "best guess" a recession was ahead.
"Look, nothing is certain and all economic forecasts have uncertainty. My best guess is that a recession is ahead. I base that on the fact that we haven't had a situation like the present with inflation above 4 percent and unemployment beyond 4 percent without a recession following within a year or two," Summers explained. "And so I think the likelihood is that in order to do what's necessary to stop inflation the Fed is going to raise interest rates enough that the economy will slip into recession. And I think that view, which was not a common view a couple months ago, is now the view of a number of statistical models and the view of a range of forecasters, and I think will increasingly become a consensus view."
Not only does Biden not appear to be taking advice seriously, he also snapped at a reporter earlier on Monday, as Matt covered, for asking about chances of a recession.