Headline Roundup • December 15th, 2023
Will the US Economy See a ‘Soft Landing’ or a Recession in 2024?
Economy And Jobs,Banking And Finance,Jerome Powell,Federal Reserve,Interest Rates,Inflation,Recession,Supply Chains,Unemployment,Labor,Business
Summary from the AllSides News Team
In hiking interest rates over the last year, Federal Reserve Chairman Jerome Powell has pursued an economic “soft landing” — cooling the economy enough to quell inflation but not enough to trigger a recession. Is he nearing his goal?
The Details: The Fed held interest rates steady on Wednesday but suggested it could cut rates three times in 2024. Year-over-year inflation was 3.1% in November, far below 2022’s 9% peak and near the Fed’s 2% target. Year-over-year GDP growth was 5.2% in Q3.
‘Policymakers clearly see it coming into view’: A New York Times (Lean Left bias) writer attributed the good numbers to “healing supply chains” and workers returning from “the labor market sidelines.” The analysis framed it as a vindication of the earlier view that inflation was “transitory” — “‘transitory’ just took a long time to play out.”
‘The economy is running on fumes’: Two writers in National Review (Lean Right Bias) dismissed “alleged non-monetary ‘causes’ of inflation,” arguing that a monetary contraction foretold a coming recession. They said the Fed was ignoring money supply data, which free-market economists argue are key economic indicators.
Why the Difference: People are famously partisan when evaluating the economy, so the simple fact that Joe Biden is president may drive some divided media coverage. However, the Fed is largely insulated from political influence, and Powell is a Republican appointed by former President Donald Trump. Biden reappointed Powell in 2021, rejecting calls for a more liberal Fed chair.
Featured Coverage of this Story
Pete Marovich for The New York Times
The Federal Reserve appears to be creeping closer to an outcome that its own staff economists viewed as unlikely just six months ago: lowering inflation back to a normal range without plunging the economy into a recession.
Plenty could still go wrong. But inflation has come down notably in recent months — it is running at 3.1 percent on a yearly basis, down from a 9.1 percent peak in 2022. At the same time, growth is solid, consumers are spending, and employers continue to hire.
That combination has come as a surprise...
Vincent Alban/Reuters
Money is the economy’s fuel. When it surges, nominal GDP (real GDP plus inflation) surges. When it plunges, spending plunges. This is what the well-known and robust quantity theory of money, which has been around since the 16th century and was in recent decades championed by Milton Friedman, tells us. It’s also what common-sense, do-it-yourself economics tells us: Substantial changes in the money supply, broadly measured, make the real economy and prices, with lags, go up and down.
Surprisingly, these days, central bankers reject the tried-and-true quantity theory of money. As Federal...
FT montage/Dreamstime
Calling for recession is contrarian now
At the start of 2023, it was banal to forecast a near-term recession. Today, it’s a risky call. Most economists now see a soft landing as the likeliest way this cycle ends, for good reason. Inflation keeps surprising to the downside. Consumption has powered through high rates. Behind it all is a rock-solid labour market, which added another 200,000 net jobs in November, 50,000 above consensus estimates. As Claudia Sahm argued in our latest Friday interview, supply improvements foiled recession calls.
Nonetheless, a few...
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