Back in October, the attendees of the National Review Institute gathering in Dallas heard from a handful of our editors and contributors at the library of Harlan Crow, which could just as easily be a museum of American history. Our Kevin Hassett, who was the former chairman of the Council of Economic Advisers under President Trump and a senior adviser to him, offered a fascinating contrast between his usually cheerful and amiable personality and an economic assessment that I described as “darker than Rembrandt’s Night Watch viewed through sunglasses at midnight during a power outage.” Hassett warned that between a lingering worker shortage and supply chain issues, and inflationary pressures, the U.S. appeared to be headed towards a recession.
A recession is traditionally defined as when the gross domestic product declines for two quarters in a row. The numbers for the third quarter were a mere 2 percent — pretty lousy for an economy that was supposed to be enjoying a recovery from the pandemic — but in the fourth quarter, the GDP number boomed, all the way up to 7 percent. Recession averted, right?
Eh, perhaps not. Unfortunately, Kevin just looks a little early in his assessment, not wrong.
NPR: “A growing number of forecasters now believe a recession is on the horizon as the Federal Reserve gears up to raise interest rates sharply to combat the highest inflation in more than 40 years.”
CNN: “‘Inflation shock’ worsening, ‘rate shock’ just beginning, ‘recession shock’ coming,” Bank of America chief investment strategist Michael Hartnett wrote in a note to clients on Friday.”
Deutsche Bank Chief U.S. economist Matthew Luzzetti: “While timing the exact quarters of negative growth is never easy, we see the Fed’s tightening beginning to materially slow growth in the second half of 2023. Our baseline forecast has negative quarters for growth in Q4 2023 and Q1 2024, consistent with a recession during that time.”
The Wall Street Journal: “Robert Fry, of Robert Fry Economics LLC, puts the chance of a contraction in the next 12 months at a mere 15 percent, but raises that to well over 50 percent within the coming 24 months, and currently expects a recession lasting three quarters to begin in the final quarter of 2023.”
White House staff declaring that critics like Florida senator Rick Scott are “fully in lockstep with Putin” is not going to do anything to alleviate the country’s economic problems. Incumbent presidents whose party controls Congress very rarely win the economic blame game.