Experts explore future of US economy through unconventional methods like tarot card readings. Soft landing vs hard landing in economy discussed. Role of inflation expectations in driving actual inflation explored. Tarot card reader predicts tumultuous start of year with eventual growth and job opportunities.
Economist Torsten Slock predicts a hard landing scenario for the US economy, with a 60% chance of recession within 12 months due to slower job growth and an increase in unemployment.
Economist Louise Shainer believes a soft landing scenario is possible, where inflation gradually comes down without causing high unemployment or a recession, thanks to decreasing inflation, long-term inflation expectations returning to pre-inflationary levels, and positive growth.
Deep dives
Hard Landing Prediction
One economist, Torsten Slock, predicts a hard landing scenario for the US economy. He believes that a recession is imminent, associated with an increase in the unemployment rate. Slock thinks that the process of raising interest rates by the Federal Reserve will lead to slower job growth, eventually resulting in layoffs and a rise in unemployment. Signs of a potential recession, such as people falling behind on credit card and auto loan payments, have already emerged. Slock sees the risk of a recession as significant and estimates a 60% chance of it occurring within 12 months.
Soft Landing Possibility
On the other hand, economist Louise Shainer believes that a soft landing scenario, where inflation comes down without causing high unemployment or a recession, is possible. She points out that inflation has been decreasing, thanks to various temporary factors, such as supply chain disruptions and government stimulus checks. Shainer emphasizes the importance of inflation expectations and notes that people's long-term expectations for inflation have already returned to pre-inflationary levels. She considers a soft landing as the ideal outcome, where growth remains positive, unemployment doesn't increase significantly, and inflation gradually comes down.
No Landing Scenario
Economist Jason Furman disagrees with both the hard landing and soft landing predictions, suggesting that a landing may not happen in the near future. He argues that the effects of the Federal Reserve's interest rate hikes have already maxed out and won't have further significant impacts on the economy. Furman believes that inertia and persistent inflation are likely to keep inflation high for some time. He sees the possibility of no landing, where inflation remains elevated and the economy continues without a clear resolution. Furman suggests that a true landing may still be years away.
Predicting the future of the economy is always a dicey proposition. That is especially true after more than three years of pandemic-related economic weirdness. No one quite knows what will happen next.
Will the Fed be able to pull off a soft landing and bring down inflation without causing either a recession or a big jump in unemployment? Or will we end up with a hard landing, in which inflation comes down, but at the price of the country's economic health? Or, a third possibility, will the Fed not successfully bring inflation down at all?
On today's show, three economic experts explain what they look for when trying to make predictions about what might come next for the U.S. economy. And how those indicators lead them to very different conclusions. We will also consult a tarot card reader...to see if her reading of the future can help us know which outcome is the most likely.
This episode was hosted by Keith Romer, Sarah Gonzalez, and Jeff Guo. It was produced by Sam Yellowhorse Kesler and edited by Jess Jiang. It was engineered by Kwesi Lee with help from Maggie Luthar and fact-checked by Sierra Juarez. Alex Goldmark is our Executive Producer.
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