(Bloomberg) — President Joe Biden said a recession in the US is possible but that any downturn would be “very slight” and that the US economy is resilient enough to ride out the turbulence.
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“I don’t think there will be a recession. If it is, it’ll be a very slight recession. That is, we’ll move down slightly,” Biden said in an interview Tuesday with CNN.
Yet fears of an economic stumble persist. The International Monetary Fund on Tuesday cut its US growth forecast for 2022 to 1.6% and held it at 1% for 2023. It trimmed its forecast for global growth in 2023 and warned of a worsening outlook for the global economy.
Biden ticked through legislative accomplishments intended to cut costs for US households, such as drug price provisions in the Inflation Reduction Act, and said they would cushion the blow of any stagnation or downturn and signaled a distrust in experts’ warnings.
“Every six months they say this,” he said of recession warnings. “There’s so much that’s been accomplished that the idea that there’s something — there’s an automaticity to a recession, and it’s just not — it’s just not there.”
Asked flatly if the American people should prepare for a recession, Biden replied: “No.”
Bloomberg Economics’ recession probability model in September pointed to a 30% chance of a downturn starting inside the next 12 months. That model-based estimate may even understate the risk, with accelerated Fed tightening making a recession a high probability in the second half of 2023, according to the Bloomberg Economics US team.
Biden has repeatedly said he doesn’t expect a recession, often disagreeing with Republicans or analysts who have warned that a downturn of some measure is a possibility, if not a likelihood or near-certainty.
The president told the Associated Press in June that a recession was “not inevitable”; but since then, the Fed has maintained aggressive rate increases and inflation has remained stubbornly high, narrowing the path for a so-called soft landing that cools price growth without a downturn.
A month later, Biden said he thought the low jobless rate would carry the economy through without a contraction.
“We’re not going to be in a recession,” he said in July. “We’ll see some coming down. But I don’t think we’re going to — God willing, I don’t think we’re going to see a recession.”
The state of the economy is a potential liability for Democrats heading into the November midterm elections, in which Biden and his party are campaigning to hold on to slim majorities in both chambers of Congress. Warnings abound that the US economy is poised for a slowdown or contraction — JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said this week that headwinds are “likely to put the US in some kind of recession six-to-nine months from now.”
The Fed isn’t officially forecasting a recession but its officials do expect unemployment to rise over the next year and Chair Jerome Powell has warned that there may be economic pain coming from the central bank’s steep rate hikes.
The Fed is poised to deliver its fourth-straight 75-basis-point hike when it meets early next month, just days before the midterms.
“At this point, the larger risks come from tightening too little and allowing very high inflation to persist and become embedded in the economy,” Federal Reserve Bank of Cleveland President Loretta Mester said Tuesday during an event with The Economic Club of New York.
The Department of Labor will release the latest inflation numbers Thursday, the last release before Election Day. The median estimate of economists surveyed by Bloomberg is for a 8.1% annual rate – the lowest since February.
A Monmouth poll conducted in late September showed 82% of Americans called inflation an extremely or very important issue and 30% approve of Biden’s handling of the issue. On jobs and unemployment, 68% said the issue was extremely or very important, with 43% approving of the president.
(Updates with Bloomberg Economics forecast, from seventh paragraph)
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