Experts: U.S. economy humming through a soft landing, recession less likely
Recession risks are receding, according to a group of 16 national bank economists, who now peg the odds of a downturn at around 30%, for both this year and next. That’s a decrease from 50% recession odds when the same economists, representing the American Bankers Association, presented an outlook last September.
The scenario for jobs, inflation and interest rates also have improved, the group added. Arizona's economic performance could be slightly better.
The national economy is progressing along a "soft-landing" path, inflation continues to moderate and employment remains robust, the group said. The economists expect the Federal Reserve will start to cut interest rates gradually around mid-year.
Members of the banking association’s Economic Advisory Committee expect the U.S. economy will expand by a “healthy” 1.7% in 2024 and 1.8% in 2025, as inflation decelerates toward the Fed’s 2% target by the latter part of 2025.
Inflation around metro Phoenix already is close to that, at 2.2%, reported the Bureau of Labor Statistics, in a separate report. That's a substantial improvement from local inflation that peaked at 13% around the summer of 2022.
“Last year’s combination of resilient growth and moderating inflation is unusual historically and should be celebrated,” Simona Mocuta, committee chair and chief economist at State Street Global Advisors, said in a prepared statement. “Easing wage pressures and realized progress on inflation will allow the Fed to begin reducing the restrictiveness of its policy stance later this year,” she added.
The economists on the panel represent giant banks including JPMorgan Chase, Bank of America, Wells Fargo, U.S. Bank and Northern Trust. None of the economists is based in Arizona.
The economists also expect national job creation to slow from more than 139,000 per month in 2024 to around 117,000 monthly in 2025. The economists expect the U.S. unemployment rate to end the year at 4.1%, up slightly from 3.9% currently, with little change after that.
Arizona’s jobless rate currently stands at 4.1%, but the measure is lower, 3.2%, in Maricopa County. Arizona continues to rank among the top states for employment growth, said Lee McPheters, an economist at Arizona State University, who sees continuing job growth in the range of 2.5% for the state.
Consumers could face more problems dealing with elevated living expenses and borrowing costs, with economists anticipating consumer delinquency rates will inch up.
Housing represents a mixed bag, they added.
“The good news is that the housing (construction) recession is over,” said Mocuta. “The not-so-good news is that a structural shortage of housing in the United States is keeping home prices elevated and affordability constrained.”
Reach the writer at russ.wiles@arizonarepublic.com.
This article originally appeared on Arizona Republic: Bankers: Recession less likely, 'soft landing' recovery underway
