Why the Recession Still Isn’t Here

Summary:

Despite widespread predictions from economists and business leaders, the anticipated recession remains elusive. The U.S. economy continues to grow, fueled by robust hiring and strong consumer spending. Over the past year, employers have added 2.75 million jobs, with 272,000 in May alone, keeping the unemployment rate at a historic low of 4% or below for 30 consecutive months. This sustained job growth has bolstered consumer confidence and spending, driving an economic expansion that defies traditional expectations.

However, signs of potential slowdown are emerging. The unemployment rate, though still low, has inched up from its post-pandemic lows, and the pace of hiring has slowed to levels last seen seven years ago. Job vacancies have also returned to pre-pandemic levels, hinting at a cooling labor market. The Federal Reserve’s aggressive rate hikes over the past two years, aimed at combating inflation, have yet to significantly dampen economic activity. But with businesses facing higher borrowing costs and tightening margins, the pressures to reduce their workforce may increase. Commercial real estate investors should remain vigilant, as sectors unprepared for sustained higher rates, including parts of the real estate market, may face increased challenges if the Fed maintains its current policy stance.

Our take (from the Straight to Smart newsletter):

Murky Jobs Data Reveals Fed’s Dilemma

Article Excerpt:

The recession, predicted by business executives, economists, and investors, refuses to show up.

Steady hiring continues to fuel consumer spending and, in turn, an economic expansion unlike any the U.S. has seen. Employers added 2.75 million jobs over the last 12 months, including 272,000 in May, the Labor Department said Friday.

The unemployment rate has been at or below 4% for 30 months, something that last occurred during the Vietnam War in the late 1960s and the Korean War in the early 1950s.

Click to read original WSJ article (subscription may be required):
Why the Recession Still Isn’t Here

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