Even a Soft Landing for the Economy May Be Uneven

What are the chances of a soft landing?

If the strained U.S. economy is going to unwind rather than unravel, it will need multiple double-edged realities to be favorably resolved.

For instance, many retail industry analysts think the holiday season may have been the last hurrah for the pandemic-era burst in purchases of goods. Some consumers may be sated from recent spending, while others become more selective in their purchases, balking at higher prices.

That could sharply reduce companies’ “pricing power” and slow inflation associated with goods. Service-oriented businesses may be somewhat affected, too. But the same phenomenon could lead to layoffs, as slowdowns in demand reduce staffing needs.

In the coming months, the U.S. economy will be influenced in part by geopolitics in Europe and the coronavirus in China. Volatile shifts in what some researchers call “systemically significant prices,” like those for gas, utilities and food, could materialize. People preparing for a downturn by cutting back on investments or spending could, in turn, create one. And it is not clear how far the Fed will go in raising interest rates.

Then again, those risk factors could end up relatively benign.

“It’s 50-50, but I have to take a side, right? So I take the side of no recession,” said Mark Zandi, the chief economist at Moody’s Analytics. “I can make the case on either side of this pretty easily, but I think with a little bit of luck and some tough policymaking, we can make our way through.”

Article source: https://www.nytimes.com/2023/01/06/business/economy/recession-soft-landing.html