After months spent waiting for the recession to finally hit, U.S. Federal Reserve Chair Jerome Powell said last week that it might not come at all. He said July 26 that the Fed's economists are no longer predicting a recession, and that "we do have a shot" of getting inflation down to the central bank's 2% target without setting off enormous job losses.
"So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession," Powell said.
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Just a few days later, Bank of America's economists said that they are expecting the U.S. to experience a "soft landing" instead of the recession that has long been promised. The bank was formerly anticipating a mild recession in the first half of 2024, but now believes that the "economy may be able to skirt one."
The way in which the economy might be able to "skirt" a recession, according to Cathie Wood, the CEO and investment lead of Ark Invest, relies on companies accepting lower margins without cutting staff.
"If prices went down and companies were willing to accept lower margins without firing people -- right now they're hoarding people -- if they're willing to accept much lower margins as prices come down, then I think we'd have a soft landing because the unemployment rate would not go up," Wood said.
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But Wood is skeptical that this will happen. Despite the resiliency of the U.S. economy, even in light of the Fed's slowdown efforts, Wood doesn't think companies will accept the lower margins that will result from falling prices. And that, she thinks, might set off the recession Bank of America thinks the U.S. might be able to avoid.
"I do think they're going to cut labor, because the full impact of monetary policy has yet to be felt," she said. "We could be experiencing the impact of tight monetary policy for the next 18 months."
JPMorgan, meanwhile, said recently that though risks of recession are still elevated for the next year, the firm -- in line with Bank of America -- doesn't see a recession on the horizon. Economic growth, according to the bank, looks "solid" for the next quarter.
"Given this growth, we doubt the economy will quickly lose enough momentum to slip into a mild contraction as early as next quarter, as we had previously projected," JPMorgan's Michael Feroli said.
