Avoiding Recession: Signs of a ‘Rolling Recession’ in the US Economy
By Experts believe the US is entering a ‘rolling recession,' meaning individual sectors decline in turn rather than all at once. CNN reports that certain economists are of the opinion that the current troubling economy is indicative of an upcoming recession.
Liz Ann Sonders, senior vice president of Charles Schwab, said last month that the US will suffer from rolling recessions that will affect some sectors but not all. In a client note Wednesday, Sonders stated that they still believe the economy will experience multiple recessions, which is supported by the declining growth of corporate earnings.
A Monday note from DataTrek Research declared that the strength seen in the US bond market is indicative of the fact that the economy is not in danger of slipping into a recession in the near future. A note from a reliable source indicates that corporate bond-yield spreads relative to US Treasuries suggest a recession is not likely to occur in either 2023 or 2024.
Although indicators are signaling a fragile transition to 2023, some economists remain cautiously optimistic that a recession will be avoided. Concerned about possible out-of-control inflation, Federal Reserve officials have increased interest rates eight times and may raise them two more times in 2023.[0] The increased cost of borrowing has led to more expensive car and mortgage loans, and this had a visible impact on the economy's growth.[1]
The spread between corporate bond yields and US Treasuries, which are considered safe assets, helps measure the risk appetite of bond traders.[2] In times of market uncertainty, the spreads widen to reward investors for taking on the additional risk of uncertain future cash flows. As the markets become more confident that earnings are dependable or increasing, spreads usually decrease. During the last few months, bond-yield spreads have dropped to figures that are less than the mean of 2015 to 2019, a time of steadiness in the larger economy.[3]
Most investors would be stunned by this news, as the widely accepted notion had been that, due to a year of high interest rates and increased inflation, the economy would slip into recession in 2023.[3] Is it possible to circumvent a recession in 2020? It seems probable that, although the chances still lean towards a short and mild recession, we can avoid it.[4]
The idea of a “rolling recession” may not be enough to account for all of the fluctuations in the economy, however, it does correspond with the pattern of certain industry downturns.[5]
0. “Economic outlook: Mild recession soon, national debt problems long term” Carolina Journal, 8 Feb. 2023, https://www.carolinajournal.com/opinion/economic-outlook-mild-recession-soon-national-debt-problems-long-term/
1. “What recession? Some economists see chances of a growth rebound.” The Spokesman Review, 9 Feb. 2023, https://www.spokesman.com/stories/2023/feb/09/what-recession-some-economists-see-chances-of-a-gr
2. “Here's why the US economy won't fall into a recession this year or next, according to a key market signal” Business Insider India, 7 Feb. 2023, https://www.businessinsider.in/stock-market/news/heres-why-the-us-economy-wont-fall-into-a-recession-this-year-or-next-according-to-a-key-market-signal/articleshow/97698876.cms
3. “The bond market is signaling that the US economy won't enter a recession” Markets Insider, 6 Feb. 2023, https://markets.businessinsider.com/news/bonds/bond-market-signals-us-economy-recession-forecast-corporate-yield-spread-2023-2
4. “Odds against a Canadian recession are rising” Toronto Star, 9 Feb. 2023, https://www.thestar.com/business/opinion/2023/02/09/odds-against-a-canadian-recession-are-rising.html
5. “We Might Be in a ‘Rolling Recession' — Here's What It Means” Entrepreneur, 10 Feb. 2023, https://www.entrepreneur.com/business-news/we-might-be-in-a-rolling-recession-heres-what-it/444809
