What Happened to the Recession?
Atlantic writers explain why the forecasters got it wrong—at least for now.
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Economists have been talking about a looming recession for months. Why hasn’t it happened yet?
But first, here are three new stories from The Atlantic:
According to the predictions of many economists last summer and fall, America should be in a recession right now. But as my colleague Annie Lowrey wrote in The Atlantic today, the facts reveal a very different state of affairs:
Unemployment is holding steady at its lowest rate in half a century. Layoffs are not increasing. The economy is growing at a decent clip. Wages are rising, and households are not reducing their spending. Corporate profits are near an all-time high. Consumers report feeling confident.
“So why,” Annie asks, “were forecasters so certain about a recession last year, leading so many people to feel so pessimistic?” The main reason the recession hasn’t arrived is that businesses and consumers have proved resilient, she explains. And that resilience is in part due to government policy: “Washington fought the last recession well enough that it seems to have staved off the next one, at least for some period of time.”
But that outcome—or any economic outcome, really—is very hard for human beings to predict. The economy is huge, and our knowledge of it is imperfect, Annie reminds us. And there’s no rich sample of past recessions to study—the United States has been through just 12 in the post–World War II period.
The available data in 2022 gave forecasters clear reasons to expect a recession: The global economy was slowing down, and interest rates were going up as part of the Federal Reserve’s efforts to tackle inflation. But though in the past that combination of factors has been troubling for the U.S. economy, that wasn’t the case this time. That’s in part because of a series of bottlenecks and shortages in our strange COVID-era economy but also, and more importantly, because “the American labor market turned out to be much stronger than economists had realized,” Annie explains:
When COVID hit, the federal government spent trillions on small-business support and cash payments to families, meaning that low-income households did not reduce their spending despite the jobless rate reaching nearly 15 percent. Indeed, they actually increased their spending. What’s more, the strong policy response had the (honestly, a bit weird) effect of boosting private-sector wages: Workers dislocated from their jobs scored significant raises when they went back to work. At the same time, because of widespread labor shortages, businesses have proved loath to let workers go.
Hearing about the American economy’s resilience can feel confusing when you keep seeing news updates about layoffs in the tech and media sectors. As my colleague Derek Thompson put it in January: “These layoff announcements have become depressingly common, even rote. But they’re also kind of mysterious,” given the fact that the overall unemployment rate in the U.S. is the lowest it’s been thus far in the 21st century.
Derek’s January article offers a few helpful frameworks for thinking about these layoffs in the context of an otherwise strong American economy. But I’ll leave you with one explanation worth remembering: the idea of “layoff contagion.” Annie elaborated on that concept in an article last month, pointing out that many of the tech companies (except Twitter) that laid off employees in recent months are actually making money. “Those firms, in other words, did not need to let so many workers go; they chose to,” Annie writes. “And they did so because other tech firms were making the same choice.”
Economic conditions have become an excuse executives use to justify their strategic decisions, she argues:
Copycat layoffs also let executives cite challenging business conditions as a justification for cuts, rather than their own boneheaded strategic decisions. In this scenario, the problem isn’t that corporate leadership poured billions of dollars into a quixotic new venture or hired hundreds of what ended up being redundant employees. It’s not that the C-suite misunderstood the competitive environment, necessitating a costly and painful readjustment. It’s Jay Powell! It’s a COVID-related reversion to the mean! Who could have known?
Although recent layoffs don’t imply a recession, an economic slowdown could still be ahead of us, Annie noted in today’s article: Wage growth is stagnating, and inflation remains high. “It might turn out that forecasts of a recession were not entirely wrong—just early.”
- Secretary of State Antony J. Blinken said the Biden administration sees “zero evidence” that Russian President Vladimir Putin is prepared to engage in serious peace talks.
- At least 43 people were killed in a head-on train collision in Greece.
- Eli Lilly announced that it will cut the price for its most commonly prescribed form of insulin by 70 percent and expand a program that caps patient costs for the drug.
- Up for Debate: Readers discuss their relationship with religion.
- The Weekly Planet: The world is finally cracking down on “greenwashing,” Emma Marris writes.
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What Active-Shooter Trainings Steal From Synagogues
By Daniel Torday
On a Sunday late in November, I spent the day at my synagogue in Philadelphia. The Germantown Jewish Centre, where I am a member, was holding a day-long security training on what to do if an active shooter came to our community’s home, and I felt compelled to attend.
The reason for the training is obvious: For a few years now, this country has been experiencing a marked, measurable uptick in anti-Semitic hate speech and even hate crimes. Fear of these kinds of attacks in synagogues is not wholly new, of course; I remember my Hungarian grandparents, Holocaust survivors, looking pale and stiff at my bar mitzvah, the first time they’d been in a Jewish house of worship in 30 years. But the proliferation of guns and the general air of rancor in the United States have made Jewish communities feel more on edge today. Even so, I’ve long been ambivalent about the effects of active-shooter drills in general, and of increasing security at houses of worship more specifically—feeling, at times, that in doing so, we lose something essential. This training would give me a chance to figure out what—and why.
So I went. Maybe I’d learn something.
More From The Atlantic
Read. “Flesh,” a new poem by Deborah Landau.
“We will miss the ice storm, we’ll be gone before the blizzard, / we’ll lie down in the dark forever just bones.”
Watch. Catch up on HBO’s The Last of Us—and then read Shirley Li’s piece on how the show cherishes a bygone world.
If you’re interested in diving deeper into Annie’s work, she has an archive of great stories about American economy and society. But today I want to recommend her 2018 classic on the small town in Arkansas where residents used to throw turkeys out of a plane on Thanksgiving (remember, turkeys do not fly). Sure, it’s a Thanksgiving story, but it’s worth reading anytime, even on the first day of March.