US economic recession is possible. US Treasury Secretary Janet Yellen said an economic recession in the United States might occur. However, he said the conditions for a recession were “appropriate and normal” for moderate growth and that inflation was still too high.
Yellen said that currently the US economy is fairly healthy with a good labor market. However, he acknowledged that the inflation rate was too high and had become a concern for the government and the American people. The good news, he said, is that inflation has decreased over time.
Looking at the base scenario for a US recession to start towards the end of 2023, coinciding with a moderate slowdown in consumption, according to an analysis on June 30, 2023.
Inflation in the US may have continued to soften in June, but the main measure of underlying price pressure is still running at an uncomfortable pace that has the Federal Reserve (The Fed) leaning towards continuing interest rate hikes this month.
The inflation rate or consumer prices in June 2023 is expected to rise 3.1 percent from last year, the smallest annual rate since March 2021 (year-on-year/yoy). With energy and food costs volatile, the core CPI is seen up 5 percent from last year. While that would be the smallest annual increase since late 2021, it would still be more than double the Fed’s target, based on a different inflation metric.
Bank of Chicago Fed President Austan Goolsbee said policymakers were on a “golden path” to temper price growth without triggering a recession in the world’s largest economy, as data for the day showed a slowdown in the still strong labor market.
US non-farm payrolls increased by 209,000 last month, less than economists had forecast, and job gains over the previous two months were revised lower. Meanwhile, the unemployment rate fell to 3.6 percent, while average hourly earnings rose 4.4 percent from a year earlier.
Goolsbee said that the consensus of nearly all FOMC attendees was for one or two more hikes this year, which he said could occur at subsequent meetings in the second half of the year.