Jakarta, CNBC Indonesia – The economic recession in the United States (US) is getting louder, echoed by a number of institutions. But the chief economist at investment banking firm Jefferies Group, Aneta Markowska, said the forecast was “false”.
He acknowledged that the US economy is now facing a number of obstacles. But a recession will not happen.
“In other words, the current recession exists only in the imagination, not in the real world,” he said in a new research report FortuneWednesday (20/8/2022).
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This is not without reason. According to him, households and businesses still have a lot of cash, which makes their prices and demand levels inelastic in the short run,
Other recession indicators such as the unemployment rate will also not be met. He believes that there are still millions of job vacancies and that there will be no massive layoffs because the company still gets a margin.
Markowska estimates the national unemployment rate will even continue to decline, as low as around 3.2%, far from the ‘Great Recession’ crisis of late 2007 to 2009.
At that time, unemployment peaked at more than 10%. In June 2022, the US unemployment rate held steady at 3.6%.
It is widely considered that a recession occurs when GDP is negative for two consecutive quarters. However, the US National Bureau of Economic Research, provides other indicators such as real personal income to industrial production.
He said that if you look at household income and employment level, everything still seems to be in good condition. So, strictly speaking, the 2022 recession seems “fake”.
Although not sure a recession will come, he said the economic downturn was unavoidable. However, US GDP is still positive for 2022 and 2023, at 2.2% and 0% respectively.
“Economic risk is still skewed to a higher level,” he said.
“The Fed is likely to “weigh down this tightening cycle, bringing the benchmark funds rate as high as 4.25% in March 2023,” he added.
Last month, the Fed made its biggest rate hike since 1994. The central bank expects core interest rates to be in a range of 3.25% and 3.5% by year-end.
Markowska’s previous statement was echoed by Andrew Hunter, a senior economist at independent macroeconomic research firm Capital Economics. This is also supported by Harvard economists who say that the chance of a recession is still less than 50%.
Meanwhile, there is also a view that the US recession will begin in the second lung of 2023. In which conditions will last five quarters.
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