On the heels of a streak of hot economic indicators, the odds of a recession have plunged to a two-year low, according to Bankrate.
The firm’s latest quarterly poll of economists notes that the likelihood of an economic downturn within the next 12 months has decreased to 33%. This figure marks a significant decline from the peak of 65% in the third quarter of 2022 and the first time since the third quarter of 2023 that no economist has been absolutely certain about a recession.
“Momentum is expected to remain intact for the foreseeable future, with the nation’s unemployment rate remaining relatively low, providing a generally solid environment for individuals and households to accomplish their financial goals,” Mark Hamrick, Bankrate’s senior economic analyst said in a note.
The analysis arrives as the US unemployment rate dipped to 3.8% in March, from 3.9% in February, highlighting the strength of the labor market.
Meanwhile, many economists suggest the next recession may be postponed rather than completely prevented. Respondents to the Bankrate survey point to ongoing geopolitical conflicts in the Middle East, which could escalate and drive up energy prices and disrupt global trade.
“Geopolitical concerns are likely to increase over the next year, raising questions about inflation and supply chains,” says Joel Naroff, president at Naroff Economics. “That could keep the Fed ‘higher for longer’ than even currently expected.”
“Consumers should prepare for a recession when it seems like nothing can bring the US economy down, leveraging their stable paychecks and a high-yield savings account to build their emergency fund,” the note added.
Economists added that rising wage growth could end up having a double-edged impact on inflation, with estimates from the Atlanta Fed indicating that paychecks are surging at a rate reminiscent of the 2000s. This would be an input for higher inflation potentially, complicating the Fed’s rate outlook and risking a recession as financial conditions remain tighter for longer.
“That could help keep the US economy on solid ground, but businesses could also decide to pass along those higher expenses to customers if they don’t have increased output or productivity to show for it,” the note wrote.
