Are recession expectations over?

Growing recession expectations earlier this year warned of future business slowdowns and significant job cuts – until a government report last month showed unemployment at its lowest level.

A few weeks later, around mid-February, new retail sales data shattered economists’ expectations, pointing to robust consumer spending, the mainstream of the U.S. economy.

The blockbuster economic performance bolstered hopes that the economy would easily avoid a recession.

The economy remains “strong and robust.” Goldman Sachs cut the odds of a recession in the next 12 months to 26%.

The U.S. economy is growing in some key metrics, but most economists say the country remains on a losing course toward a likely recession next year.

Meanwhile, Covid has forced billions worldwide into lockdown, shifting demand for concert tickets and restaurant meals to shortages of precision goods. The Russia-Ukraine war widened the deficit and drove up prices even further.

The Federal Reserve has imposed aggressive rate hikes since last year, aimed at reducing inflation by cooling the economy and suppressing demand. However, this approach risks plunging the U.S. into a recession and leaving millions unemployed.

The Fed’s rate hikes have helped push inflation down significantly from its summer peak. However, politics has not stopped the economy as a whole, as evidenced by recent strong economic statistics.

Expectations of fed tapering amid economic upturn

The combination of easing inflation and sustained economic increases has raised expectations among some for a soft assumption that the Fed will slow the economy and reduce inflation while avoiding a U.S. recession. But Fed tapering typically lags a given rate hike by months.

Some parts of the economy have shown signals of slowing down. Home sales decreased for the 12th month in January and hit the lowest since November 2010.

The president and CEO of the Las Vegas Global Economic Alliance said the city was previously strong as leisure and travel rebounded from the lull of the pandemic.

The average rate for a hotel room in Las Vegas was $166, well above the pre-pandemic rate of $127. Las Vegas Airport handled 52.6 million passengers last year—a jump from 51.5 million in 2019.

However, rising costs have overshadowed the company’s profits, as major food suppliers are paying twice as much for some products as before the pandemic. Perhaps the recession is forcing corporate clients to cut back on catering, which accounts for 73% of the company’s revenue.