Jul 18, 2023 - Economy

Everyone's starting to feel the "soft landing"

Animated illustration of a paper airplane made out of a hundred-dollar bill flying and landing softly.

Illustration: Brendan Lynch/Axios

The odds of a U.S. recession are falling, economists say, as inflation tumbles without the big rise in unemployment that many expected.

Why it matters: Shifting views on the likelihood of a downturn underscore just how surprisingly resilient the U.S. economy has been.

Driving the news: On Monday, Goldman Sachs economists trimmed the estimated probability of a U.S. recession over the next 12 months, to 20% from 25%. (Last July Goldman had the odds at 30%.)

  • On Saturday, the Wall Street Journal's survey of 69 business and academic economists showed them cutting consensus probability of a downturn over the next 12 months to 54%, from 61%.

🗣 What they're saying: "The main reason for our cut is that the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession," Goldman economists wrote.

Flashback: The Federal Reserve slammed on the economic brakes last year, delivering the sharpest series of interest rate increases in 40 years, as it sought to bring inflation down from a peak annual rate of 9% a year ago.

  • The widespread economic wisdom at the time was that such a sharp surge in interest rates was sure to tip the U.S. into recession.

Yes, but: So far, inflation has gradually eased — the annual rate was just 3% last month — without the economy shrinking.

  • True, growth has slowed from the 7% rate seen in 2021 to about 2% in the first quarter of this year.
  • But the jobless rate in June was 3.6%, still near low levels not seen consistently since the late 1960s.

The bottom line: It's always fun to catch economists getting things wrong. But some humility is advisable.

  • As the great economic theorist and catcher Yogi Berra was supposed to have said, it's tough to make predictions, especially about the future.

Go deeper