There’s a recession-industrial complex in America—a whole field of natterers regularly predicting economic turmoil. Every now and then, they’re right, like the proverbial broken clock. Most of the time they’re wrong. People listen to them anyway.
You’ve probably heard a recession is likely in 2023. You might even think we’re already in a recession. We’re not. Unemployment is remarkably low and the economy is still growing. But economists see plenty to worry about: quickly rising interest rates, stubbornly high inflation, a slowdown in corporate profits, growing amounts of debt. Plus the party out of power in Washington, D.C.—for now, Republicans—typically preach a gospel of gloom, to convince voters everything is terrible and the current administration is failing.
There’s a group of economists that determines the “official” beginnings and ends of recessions. The last recession started in February 2020 and ended two months later, the shortest downturn on record. The recession board takes its time. It didn’t announce the end of the 2020 recession until 16 months later.
The recession lobby, by contrast, is always telling us what is going to happen, which is what everybody wants to know when you’re trying to gain an investing edge and get ahead of the competition. But the future doesn’t always cooperate with the present because whatever is going to happen hasn’t happened yet. So forecasters are frequently wrong. They’ll never stop forecasting, but their recent track record should make you skeptical every time you hear somebody predicting a recession.
July 19, 2021: The National Bureau of Economic Research declares that the 2020 recession ended 16 months earlier, in April 2020.
Aug. 20, 2021: Barron’s says that “a ‘flash recession’ might be looming,” even though the last recession just ended. But no recession materializes, flash or otherwise. GDP, adjusted for inflation, grows 2.1% from the prior quarter.
Oct. 11, 2021: Bloomberg asks, “Is the U.S. already in recession?” This is a sneaky journalistic trick: When you don’t have the evidence to make a declarative statement, frame your thesis as a question, instead. That way, you’re not actually asserting the thing you want people to think. You’re just suggesting it, with plausible deniability when you turn out to be wrong—which Bloomberg was. There was no recession in October 2021. Real GDP growth for the quarter came in at 6.9%.
Oct. 18, 2021: The New York Post insists, “U.S. has dipped into recession.” Wildly wrong.
Jan. 18, 2022: The conservative Heritage Foundation, which ought to know better, says “we’re staring down the maw of a major recession.” Wrong maw. There’s been no major recession. GDP growth in the quarter came in at -1.6%, but that was largely because the Covid Delta variant surged and many consumers went to ground for several months.
March 11, 2022: Fortune reports that “Goldman Sachs warns Russia’s war on Ukraine could plunge U.S. and Europe into recession.” This is actually plausible. Energy prices were spiking and tough new sanctions on Russia rattled markets. That recession didn’t happen either, however.
June 22, 2022: Politico informs us, “a recession is inevitable.” That’s like saying death is inevitable. Without a date, meaningless.
June 24, 2022: JPMorgan refers to “the recession everyone sees coming.” Wow! Everyone! Everyone can't be wrong, can they?
July 28, 2022: Second-quarter GDP growth comes in at -0.9%, later revised to -0.6%. That marks two consecutive quarters of declining GDP, which some old-timers think is the textbook definition of a recession. The Guardian, for instance, announces “the unofficial start of recession.” But that’s not the definition of a recession. The NBER says a recession is “a decline in economic activity that lasts more than a few months.” It has not said there was any recession in 2022.
Aug. 10, 2022: Forbes gets more assertive and says, “a recession is coming,” without framing it as a question. Okay, but when?
Sept. 29, 2022: The Conference Board reveals that “U.S. recession probability reaches 96 percent.” Pay attention to that 4 percent.
Oct. 2, 2022: CNN lists “5 signs the world is headed for a recession.” They forget No. 6: We’re talking ourselves into it.
Dec. 26, 2022: CNBC explains “why everyone thinks a recession is coming.” Everyone, that is, except the consumers whose spending drove real GDP up 2.9% in the quarter.
Feb. 27, 2023: The Associated Press points out that “2023 U.S. recession now expected to start later than predicted.” No kidding! Well, better late than never. Let's get this funeral started.