Vivekanand Jayakumar’s conclusion in his piece at The Hill is a bit milder than its caption (“Those predicting a soft economic landing may be in for a rude awakening”) might lead you to believe:
Expectations that decades-high inflation levels can be brought down (alongside an unwinding of more than a decade of monetary excess) without causing any major financial or economic turmoil requires a level of innate optimism that might border on delusional thinking. Those who still think that a soft-landing is the likeliest outcome may be in for a rude awakening. The stock market in particular may be mispricing near to medium term risks.
A recession is the likely outcome, and the possibility of a stagflation-lite scenario cannot be ruled out. But resilient consumers (aided by relatively strong household balance sheets and tight labor markets) offer a modicum of protection against the possibility of a deep or protracted recession. Limited fiscal space and sticky inflation may, however, restrict policymakers’ ability to offer sizable stimulus this time around.
The statistics (debt service to disposable income, total household debt, etc.) seem to bear out his observation about the “resilient consumers”. I’m still concerned that our elected representatives are victims of Maslow’s hammer. “Stimulus” is the only thing they know.
President Biden may wish that a brief recession had taken place in 2022-2023 rather than holding off until 2023-2024. He will have a lot on his plate next year.
