Restarting China and its economy, slowing gas prices in Europe and inflation in the US, and the good health of the US labor market tend to remove the risk of a global recession. As pointed out in a related New York Times article with the thought-provoking headline “What Recession?”, the US Federal Reserve Bank, the Fed, has been aggressively raising interest rates, but instead of the recession we expected, the economy seems to be doing very well. . US businesses added half a million new jobs in January alone, the housing market is showing signs of stabilizing or even rising, and many Wall Street economists are beginning to play down the chances of a recession this year. And US unemployment is at 3.4%, the lowest level in at least 53 years, and there have been so many hirings over the past year that it has worried Fed Chairman Jerome Powell.

As the American newspaper points out, not all evidence is rosy. The manufacturing sector remains weak and consumer spending appears unsustainable, justifying some economists and analysts who are still predicting a recession. However, their tones are much lower. Citi Group, for example, gives a 30 percent chance of a global recession, but is clearly more optimistic than last year, when it gave a 50 percent chance. At the same time, Reuters points out that many of the largest companies in the world, mainly American technology giants such as Meta, IBM, Amazon, Yahoo and many others, are laying off thousands of people. However, as Ronnie Walker, an economist at Goldman Sachs, points out, these layoffs mostly concern tech giants that have hired unusually large numbers of employees during the pandemic. He also emphasizes that the tech giants do not represent the economy as a whole.

Bond markets continue to point to an imminent recession, with US and German short-term debt yields rising.

At the same time, bond markets are still trending towards an impending recession. Yields on short-term debt in both the US and Germany, as well as in some other countries, are rising, often exceeding those on long-term debt. And this historically indicates that the market is devaluing the upcoming recession. Meanwhile, bond traders expect the Fed to raise interest rates to 5-5.25% and then decide on a rate cut towards the end of the year. Since the beginning of last year and just a few days ago, the Fed has raised dollar interest rates from near zero to 4.5%, marking the most aggressive turn to restrictive monetary policy in decades. This increase in borrowing costs has automatically led to higher car and mortgage payments, and it really does seem to be slowing down the US economy at the moment. However, since December, when it began to appear that he intends to implement a more lenient pace of restrictive policy, the markets have again relaxed. Mortgage rates in the US have already fallen slightly. Home loan applications are recovering, albeit at a low level. Sales of new homes are about the same as before the pandemic. Used car sales have fallen but are now on the rise again. While US household retail sales and spending have declined, many analysts believe that new forces are entering the market that could boost consumer demand this year.

In short, after more than a year of high inflation eroding consumer purchasing power, wage growth is beginning to outpace price increases. And because businesses are still hiring, Americans have money to spend. Of course, there is no guarantee that all these factors will balance out the impact of higher interest rates. Lower-income strata have already been spending their savings much faster than higher-income social classes, and they no longer have the ability to spend more. Speaking to the NYT, Nella Richardson, an economist at the ADP news agency, takes issue with the notion that the US economy is picking up again and reminds that “the economy could very well have a strong labor market and low growth.” For the Fed, however, the critical question is how much it needs to raise interest rates to ensure that both inflation and the economy and its growth return to sustainable levels.