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Economists are less and less worried about a recession in 2023


The much-discussed 2023 recession has yet to happen, and economists increasingly believe it will.

This week, Wells Fargo’s team of economists became the latest to pull back its recession outlook. The company now sees a recession as early as 2024 as recent economic data suggest an economy is “not yet on the brink of recession”.

The Wells Fargo team of economists wrote in a note to clients on Wednesday: “While we still expect the slow effects of monetary and credit tightening to slow the economic growth, but the economy proved more resilient than we anticipated.” “As a result, we pushed back our expectations of the beginning of the economic contraction to the first quarter of 2024.”

Wells Fargo isn’t the only company to become more optimistic about the prospects for economic expansion in 2023. Goldman Sachs cut the odds of a recession this year from 35% to 25% earlier this week. Capital Economics teased in a note on Wednesday that it plans to roll back a recession call in the third quarter. Bank of America Chief Economist Michael Gapen explanation for Yahoo Finance Live increasingly likely to lead to a “soft landing” or a mild recession. There are even cases where there is no recession according to what Goldman Sachs COO John Waldron told Bloomberg earlier this week.

The positive outlook follows the economic data that economists often refer to as “elastic.” US labor market 339,000 jobs added in May, the biggest monthly gain since January. Job opportunities in April surprised opposite, too. All while consumers continue to spend despite tough inflation.

As of Thursday, the Atlanta Federal Reserve forecasts the U.S. economy will grow 2.2% in the second quarter, marking the fourth straight quarter expansion of gross domestic product. Normally, two consecutive quarters of decline in GDP would be taken as an official sign of recession.

“We now suspect that the economy is unlikely to slip into a recession as early as the third quarter, as we had previously predicted, and it will take longer for a recession to be meaningful in the market. labor market becomes a reality,” Capital Economics wrote on Wednesday.

The recession debate comes as Wall Street wonders how the economy will respond to the Federal Reserve’s most aggressive interest rate hike campaign in 40 years. The economy could go down from raising interest rates with a ‘hard landing’when the Fed causes a deep recession and soaring unemployment, or a soft landing, when the US economy slows down only slightly.

Gapen noted that the “mild recession” he and BofA are projecting fit the description of a soft landing. The likelihood of this happening has generally increased over the past few weeks as the credit crunch resulting from the Silicon Valley Bank collapse appears to have moderated and the debt ceiling debate in Washington has been resolved. decide.

“Unless banking stress worsens and a credit crunch is revealed, it’s currently difficult to know where that risk of a hard landing is coming from,” Gapen told Yahoo Finance Live. .

General view of Pacific Western Bank in Huntington Beach, California, U.S., March 22, 2023. Pacwest is one of a number of regional banks under pressure since the collapse of Silicon Valley Bank.  REUTERS/Mike Blake

General view of Pacific Western Bank in Huntington Beach, California, U.S., March 22, 2023. Pacwest is one of a number of regional banks under pressure since the collapse of Silicon Valley Bank. REUTERS/Mike Blake

There are still calls for a price cut for the economy. Morgan Stanley sees corporate earnings falling 16% by the end of the year while analysis from Bespoke Investment Group shows investors haven’t bet much on this on the S&P 500’s decline since 2015. 2007.

But the stock market is seen as a forward-looking indicator and Nasdaq is up more than 26% this year while the S&P 500 is mostly in a bull market. So if a severe recession persists into 2023, the market will not value it.

Josh is a reporter for Yahoo Finance.

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