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Are we heading toward a recession? Here's why economists are divided


A lot of people around the country wonder if the U.S. is headed for a recession. Strong unemployment numbers yet high interest rates and low spending have economists split on the question. Some do forecast a recession. Others say the U.S. economy will achieve what's called a soft landing. NPR's Stacey Vanek Smith joins us. Stacey, thanks so much for being with us.

STACEY VANEK SMITH, BYLINE: Hi, Scott. I'm so glad to be here.

SIMON: And what's the difference between recession and soft landing?

VANEK SMITH: I think that's a great question. Essentially, a recession is when the economy is shrinking. It starts producing less stuff - fewer cars, fewer laptops, fewer haircuts. And when that happens, companies - you know, they put the brakes on. They produce less. They get smaller. They tend to lay people off. And a soft landing is a little more like the economy just takes its foot off the gas. So companies' growth, the economy's growth - it slows down, but it doesn't start shrinking.

SIMON: So are we heading into a recession?

VANEK SMITH: The short answer is, I don't know. And a lot of economists are very divided about this - for good reason, I think, because a lot of the economic data we're getting in, a lot of the big numbers - they're not telling a consistent story.

SIMON: Well, help us understand what the data shows 'cause it would seem like if we were headed into a recession, the direction would be clear.

VANEK SMITH: Yes. In past recessions - certainly the ones I've experienced - you know, you feel it. You really feel it. But this is a strange moment. For instance, some of the data that we're getting from the economy is extremely positive. Look at the unemployment rate. Look at jobs. Economist Justin Wolfers at the University of Michigan - he thinks that we are definitely going to have a soft landing.

JUSTIN WOLFERS: You're talking to an economist who is going to be happy and tell you that I see really good things, and I'm not going to be miserable, and I'm not going to be dismal, and I want to celebrate the moment.

VANEK SMITH: Wolfers makes the point that jobs are bigger than just a data point. You know, when people have jobs, they're confident. They spend money. They borrow money. They quit. They switch careers - all the things people do when they feel confident. And so jobs are a big deal. And Wolfers also points out that all of this good jobs news is pretty miraculous considering where our economy was just a few years ago.

WOLFERS: March of 2020, unemployment was spiking to rates not seen since the Great Depression. If you had said in three short years we'll yield an unemployment rate that earlier generations of economists had said was impossible, I wouldn't have believed you.

VANEK SMITH: And so, Wolfers says, as long as unemployment stays low, we are in good shape.

SIMON: With due regard to the professor, what's the case for a recession?

VANEK SMITH: Well, there's some strong data pointing to a recession, too, honestly. Dana Peterson is chief economist at the Conference Board, an economic think tank. I mean, she pointed to all the layoffs we've been seeing in industries like tech. I mean, that just - tens of thousands of people losing their jobs.

DANA PETERSON: Businesses, if they get this whiff of weakness ahead, they're going to pull back.

VANEK SMITH: Peterson says a recent survey of CEOs in the U.S. found that most of them think a recession is coming or even that we might already be in one. So she thinks we've got a recession on the horizon for sure. But she did say it might be a very mild recession.

SIMON: Unemployment is so low. At the same time, are experts...


SIMON: ...I don't know, possibly more optimistic than they are willing to let on officially?

VANEK SMITH: The economists that think we are in a recession or heading for a recession think that maybe unemployment numbers are artificially low. So many companies were saying they couldn't find workers. It was so hard to keep workers. And so they're just possibly more hesitant to let them go than they normally would be. But I think what worries people, including Dana Peterson, is that if companies start to feel maybe like things are changing - that they might decide, you know, let's save some money, let's clear the decks, and that if a lot of companies decide that at once, the unemployment situation in the U.S. could change really fast. You know, hundreds of thousands of jobs could kind of disappear.

SIMON: Stacey Vanek Smith, thanks so much.

VANEK SMITH: Thank you, Scott. Transcript provided by NPR, Copyright NPR.

Scott Simon is one of America's most admired writers and broadcasters. He is the host of Weekend Edition Saturday and is one of the hosts of NPR's morning news podcast Up First. He has reported from all fifty states, five continents, and ten wars, from El Salvador to Sarajevo to Afghanistan and Iraq. His books have chronicled character and characters, in war and peace, sports and art, tragedy and comedy.
Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.
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