At a time when many economists who once predicted a recession for the?US have already taken a U-turn amid the economy showing relative strength in 2023, a lead economist at?Oxford Economics has a different opinion,?
Oren Klachkin, lead U.S. economist at the independent economics advisory firm Oxford Economics, doesn¡¯t buy the new rosy outlook that many economists are painting.
¡°Some forecasters are removing a U.S. recession from their baselines. But we continue to think that elevated interest rates, restrictive Fed policy, and tight lending standards will cause a mild recession in late 2023,¡± he mentioned, as per a?Fortune report.
The economist acknowledged some risks to his forecast, noting that the economy has impressively recovered from the pandemic. But with consumers quickly?spending?their COVID-era savings and businesses slowing?hiring, the economist still believes a ¡°mild recession¡± is coming.
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However, economist Klachkin also noted that how you define a recession is important in this case.?
The National Bureau of Economic Research (NBER) defines a recession as two consecutive quarters of negative gross domestic product (GDP) growth coupled with ¡°a significant decline in economic activity that is spread across the economy and lasts more than a few months.¡±?
But ¡°with some industries performing poorly and others remaining buoyant, it¡¯s possible that the economic data won¡¯t satisfy the traditional definition of recession used by the National Bureau of Economic Research ¨C the arbiter of U.S. recessions,¡± Klachkin explained.
After years of COVID lockdowns and travel restrictions, people in the US are back at airports and restaurants, looking to make up for lost time. Their rapid shift in spending habits has helped services sectors, like travel and leisure, thrive even as sectors that focus on selling goods, like manufacturing and construction, struggle, the report mentioned.?
If that continues: ¡°Instead of a typical recession, it¡¯s possible the economy will fall into ¨C or in fact is already in ¨C a ¡®rolling¡¯ recession,¡± economist Klachkin wrote in a note.
A rolling recession is when some industries contract and suffer job losses, while others continue to grow, leaving the overall GDP growth positive, but low by historical standards.
On the other hand, a usual/typical recession,?two successive quarters of contraction?in GDP is commonly described as a technical?recession.?While a standard recession hits all sectors at approximately the same time, a rolling recession means some industries are contracting as others expand.??
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