‘No Landing’ scenario is on the rise for U.S. economy

Experts say the ‘No Landing scenario,’ meaning the U.S. economy would continue to fly high without experiencing recession or slowdown, is becoming a stronger possibility. This is not a soft or hard landing, but a third possibility is gaining traction thanks to the country’s positive economic signals, including the employment rate.

An article from The Wall Street Journal reported on Sunday (local time) that “now have some economists pointing to a third scenario that seemed improbable just a few weeks ago: an economic growth upturn.”

“A ‘no-landing’ scenario is a present-day reality,” said Neil Dutta, an economist at the research firm Renaissance Macro. While many Fed officials said they still expect the economy to slow this year, Mr. Dutta said he sees “a huge reluctance to admit the obvious, which is that the economy is re-accelerating, full stop.”

Assorted economic indexes show no trace of slowdown, which is why the prospect for a continued economic boom is coming from the U.S. It will not be a hard landing - a sudden exacerbation nor a soft landing – a moderate slowdown of the economy. The nation’s hiring has chugged recently. The Labor Department reported this month that employers added a robust 517,000 jobs (excluding the agricultural sector), which is more than the 2.7 times increase (188,000) that the market had previously expected. The unemployment rate decreased to 3.4%, the lowest in 54 years since May 1969.

The same goes for other signals, including consumer sentiment. Last week Mastercard estimated that U.S. retail sales, excluding cars, rose 8.8% in January from a year earlier. An index of aggregate weekly hours in manufacturing rose 1.2% in January. Reflecting the trend, economists at Goldman Sachs now see a 25% probability of a recession over the next 12 months, down from an earlier estimate of 35%.

Yet, many economists still expect a recession, according to The Wall Street Journal. Some say the Fed moved so fast to raise rates that the economy hasn't had enough time to reveal the full effects. The last time it lifted rates to current levels was in early 2006, and it took another one-and-a-half years for labor markets to wobble.


Hee-Chang Park ramblas@donga.com