Warnings that US faces ‘ugly’ recession - InterestRate.co.uk

Warnings that US faces ‘ugly’ recession

Countries around the world have been experiencing what seems like non-stop problems over the past few years. The economic impact of the Covid-19 pandemic was catastrophic, but just as economies were starting back on the path to recovery, other significant issues hit, including the war in Ukraine and soaring inflation, which has rocketed to its highest level in decades.

While many countries are experiencing huge economic issues, there have been stark warnings that the world’s biggest economy could endure a particularly ‘ugly’ recession. In fact, according to a recent Economist and YouGov poll, 60% of Americans believe that the United States is already in recession, with vast numbers of people cutting back on everything from driving to grocery purchases to cut costs.

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In addition, the property market has taken a hit, and the slowdown means that homeowners no longer have the security of high equity levels in their homes. The S&P 500 index has also fallen by 19% this year, wiping out trillions of dollars in wealth and causing panic among many.


Despite all this, there has been no official confirmation the nation is in the throes of a recession. Some wonder whether the results of current polls are more down to sentiment than an actual recession.

America differs from other nations

One point is that GDP in the United States has now fallen for two quarters in a row, which would be a recession in most countries. However, this is not the case in the USA. Instead, the Business Cycling Dating Committee, made up of a group of economists, says whether there is a recession.

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While the US might not have officially declared a recession yet, there are warnings that it faces an ‘ugly’ recession that could last until 2023 and have a massive impact on stocks. This is according to economist Nouriel Roubini, who predicted the global financial crash in 2008.

US Treasury Secretary Larry Summers recently said: “There’s never been a moment when we’ve had inflation above 4% and unemployment below 4%, and we didn’t have a recession within two years.”

softer landing

Possibility of a ‘softer landing’

Although some believe the US is heading toward a long and deep recession, others believe the economic slowdown could be more moderate and result in a ‘soft landing’.

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This would mean slower economic growth but not a full-on downturn. The scenario could be a possibility because of the robust jobs market in the USA, with 315,000 new employees added by employers in August. Christopher Waller, the US Federal Reserve governor, said this figure did not point toward a seriously faltering economy.