Another Wall Street bank gives up on their 2023 recession prediction

Another Wall Street bank gives up on their 2023 recession prediction

The US Economy Continues to Show Resilience: Recession Forecast Pushed to 2024

JPMorgan Bank

JPMorgan has become the latest bank on Wall Street to revise its recession forecast, pushing it to 2024 or even further. This comes just days after Bank of America also delayed its 2023 recession prediction. The optimistic outlook is based on the waning disruptions caused by the pandemic and the positive developments on the supply side.

Don’t hold your breath for an economic recession to hit the US anytime soon. This is the message conveyed by JPMorgan in their recent note. The bank now predicts solid economic growth for the third quarter of the year, and while recession risks are still elevated for next year, there could potentially be a period of “modest, sub-par” economic growth.

“The early adding-up of third-quarter data suggests the economy is expanding at a healthy pace, and we are revising up our current-quarter tracking of real annualized GDP growth from 0.5% to 2.5%,” says JPMorgan’s Michael Feroli. This indicates that the momentum in the economy is still strong enough to prevent a mild contraction as previously projected for the next quarter.

One of the main factors contributing to the resilience of the economy is the rock-solid job market. The US saw nearly 200,000 jobs added last month, bringing the year-to-date job gains to an impressive 2 million. A robust jobs market fuels consumer spending, which accounts for a significant portion of the overall economy.

While there are early signs of credit deterioration, the economy still possesses enough momentum to avert a recession in the near-term. The most recent GDPNow estimate from the Federal Reserve Bank of Atlanta suggests annualized GDP growth of 3.9% for the third quarter.

Despite the positive outlook, there are potential downside risks to the economy. One such risk is if inflation doesn’t continue to ease, but instead rebounds. This could put pressure on the Federal Reserve to continue hiking interest rates or at least delay future interest rate cuts. The recent surge in gas prices adds to the inflation equation, further complicating the situation.

“If inflation doesn’t continue to ease, more Fed hikes and rising odds of a downturn will come back… Absent further slowing in wage growth, the Fed may feel compelled to resume hiking, which would dash soft landing hopes,” warns Feroli.

In conclusion, the US economy continues to showcase its resilience amid lingering uncertainty. JPMorgan’s revised recession forecast suggests a positive outlook at least until 2024, based on current economic indicators and robust job market performance. However, downside risks such as inflation and potential interest rate hikes could introduce instability in the future. For now, the US economy remains on a solid growth trajectory.