Today, Explained
Where did the recession go?
Aug 1, 2023
Tracy Alloway, co-host of the Odd Lots podcast and an economics expert, teams up with Greg Ip, Chief economics commentator at The Wall Street Journal. They tackle the surprising resilience of the U.S. economy and the paradox of declining inflation alongside low unemployment. The duo discusses the implications of government spending on healthcare and climate initiatives, while also exploring the potential for a 'soft landing' instead of a recession. Their insights challenge traditional economic theories amidst ongoing uncertainty.
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Quick takeaways
- The resiliency of the US economy and consumer demand, along with increased government spending, have contributed to a soft landing, avoiding a recession.
- Uncertainty around the impact of interest rate hikes and the possibility of inflation remaining stubbornly high or experiencing extreme volatility are concerns for economists and policymakers.
Deep dives
The Resilience of the Economy and the Soft Landing Scenario
Despite predictions of a recession, the economy has shown resilience, with unemployment remaining low and inflation coming down. This has led to the possibility of a soft landing, which many people would prefer over a recession. However, there is a concern about the lack of clarity regarding why inflation has decreased without affecting the unemployment rate. This has led to an existential crisis for economists and monetary policymakers, as traditional economic theories do not fully explain the current situation.
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