Is the US economy showing no signs of recession, or is it inevitably heading for recession? Or is it already in recession? More than a month after two consecutive quarters of contraction in the United States, different economists still have different views.

Steve Hanke, a professor of applied economics at Johns Hopkins University, believes that the United States will move towards a "huge" recession in 2023. Although Stephen Roach, a researcher at Yale University, agrees that the United States needs a "miracle" to avoid recession next year, it will not be as serious as it was in the early 1980s.

However, Richard Thaler, the Nobel laureate in economics, said he did not think there were "any signs of recession" in the US, pointing to recent low unemployment, high job openings and the fact that the economy is growing-just not as fast as prices.

Market investors are similarly divided. Liz Ann Sonders, chief investment strategist at Charles Schwab Corp, said the US economy is now more likely to fall into recession than a soft landing, although this may be a cyclical recession that will have an impact on the economy. However, Steen Jakobsen, chief investment officer of Saxo Bank, said: the US is not nominally going into recession, even if it is not.

Recent surveys reflect this divergence. According to a survey of economists conducted by Reuters at the end of August, there is a 45% chance that the United States will fall into a recession within a year (most people think the recession will not be too long and by a small extent), according to a Bloomberg survey. The probability of the US economy falling into recession is 47.5%.

Indicators of differentiation

So why is there such a difference? It depends on what economic data you focus on: gross domestic product (GDP) or the job market.

In the United States, GDP fell 0.9% in the second quarter from a year earlier and 1.6% in the first quarter, in line with the traditional definition of a recession. The decline in economic growth was caused by a number of factors, including falling inventories, investment and government spending. Inflation-adjusted personal income and savings rates have also declined.

In the United States, however, the recession is officially announced by the National Bureau of Economic Research, which may not judge for some time.

Unlike negative GDP growth every six months since 1947, the job market has remained strong this time. Closely watched non-farm payrolls data for August released on Friday showed that non-farm payrolls rose by a better-than-expected 315000, a steady increase but the lowest monthly increase since April 2021.

At the same time, other recent data show that private sector employment growth has slowed, but the proportion of new job openings is much higher than expected.

William Foster, senior credit director at Moody's Corporation, pointed out that the comparison of employment data with GDP remains a major focus of debate among economic commentators, against the backdrop of the Fed's rapid shift from loose monetary policy (increasing the money supply to boost the economy) to restrictive monetary policy, including raising interest rates to combat inflation. The US inflation rate reached 8.5 per cent in July.

"We are coming out of a special period that we have never seen before in history," Foster said. When making decisions, the National Bureau of Economic Research takes into account household real income, real spending, industrial production, labor market and unemployment rate, which do not give clear signs of recession. At the same time, it is still very difficult to recruit people in the job market, especially in the service sector. "

Broader indicators

Foster also noted that despite the slowdown in growth, household spending remained relatively strong, thanks to the accumulation of household savings during the outbreak. However, Joseph Stiglitz, an economist and Nobel laureate, recently said he was concerned about the decline in workers' real wages despite the tight labour market.

In addition to disagreements over which indicators to focus on, commentators are also divided over the performance of some industries.

Peter Boockvar, chief investment officer of Bleakley Advisory Group, said the latest US housing and manufacturing data show that the US will not avoid a recession. In August, the National Association of Home Builders and the Wells Fargo & Co housing market index fell to negative.

But Jakobsen said: "the rental market is still growing in double digits. This will not lead to a recession. Quite simply, people have enough money on their balance sheets to buy an apartment and rent it out for a profit of 20% to 30%. So [the recession] won't happen. "

A period of turbulence

Alexander Nutzenadel, a professor of social and economic history at Humboldt University in Berlin, says there are broader reasons for the current level of debate. "We live in a period of multiple shocks-from the COVID-19 epidemic triggered by energy prices to political de-globalisation-which makes it extremely difficult to predict," he wrote. " This means that the economic performance of highly developed countries like the United States depends to a large extent on external factors.

He went on to write that the current "stagflation"-high inflation and economic stagnation at the same time-is rare in history, though not entirely unprecedented. "We had a similar moment in the 1970s, but we know from this experience that it is difficult for monetary policy to find the right balance between fighting inflation and preventing recession," he said. "

Finally, he points out that economics majors have become "much more diversified" in recent years. "there is no 'mainstream economics' anymore," Nutzenadel said. "everything becomes controversial, including theories, data and methods."

The official declaration of recession by the National Bureau of Economic Research has recently been questioned by some people. Tomas Philipson, a professor of public policy studies at the University of Chicago, recently asked: "Why should we let an academic community decide?" We should have an objective definition, not the opinion of the academic committee. In any case, what really matters is that the salary is not that high. It doesn't matter what you call it. "