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Concerns over whether U.S. headed for another recession

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Published  October 12, 2022 5:56pm PDT
Economy
KTVU FOX 2

Is the U.S. headed for another recession?

Many people are wondering if the economy is about to have some sort of epic reversal, given inflation, supply chain problems, re-rising energy and food prices, just to name a few.

OAKLAND, Calif. - Some may be wondering whether the economy is about to have some sort of epic reversal given several factors, from inflation to supply chain issues to food prices, just to name a few.

The Federal Reserve is likely to raise rates a couple more times.

"This is a meant to be, engineered slowdown in the economy," said Terry Connelly, a former Wall Street investment banker and retired Dean of the Golden Gate University School of Business.

He said in order to get inflation under control, consumers must spend less, and employers must cool it on hiring and wages.

Take into account these very recent developments. Wholesale inflation rose an unexpectedly high 8.5%, diminishing American purchasing power. Finance giant Morgan Stanley says home prices will fall 7% next year as mortgage interest rates continue to rise.

There's more.

The head of JPMorgan Chase expects that a recession will come in six to nine months. Bank of America says the U.S. economy will soon start losing 175,000 jobs a month.

Economist Robert Shiller's respected "crash confidence index" shows that a big majority of individual investors are worried about the possibility of a U.S. stock market crash.

Personal computers shipments have plunged to nearly 20%, the most in two decades, and even back-to-school promotions could not save them.

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Nonetheless, on Tuesday President Biden told CNN that he expects no recession or, at worst, a very light one.

"The fed has not been particularly good at bringing down inflation without causing, at least, a mild recession," said Connelly.

"Odds are better than 50/50 that we'll have a recession," said Jim Wilcox, a widely respected economist and professor at UC Berkeley's Hass Graduate School of Business.

"The question is: Will it be reasonably short and will it be reasonably shallow?" said Connelly.

Consumers still have considerable purchasing power. The labor market remains strong, and federal programs such as the infrastructure and the microchips act will significantly bolster the economy.

"If it does come, it would start more towards the winter of 2023," said Wilcox.

The federal government will release the latest inflation indicator, the Consumer Price Index, on Thursday.