As 2024 comes to a close, the US economy is defying expectations, with employment and prices settling into healthy levels. Wages are growing, inflation is back to pre-pandemic norms, and the stock market is reaching record highs. The metaphor of a “soft landing” versus a “hard landing” for the economy, likened to an airplane and the Fed as the pilot, is being discussed in economic circles. The soft landing scenario is playing out, with inflation cooling and the labor market thriving, contrary to predictions of a hard landing with high unemployment.
The optimism about the current state of the economy is reflected in the way the labor market and inflation have stabilized. The recent jobs report for September showed strong job growth and a decline in the unemployment rate, easing fears that the job market was slowing down. Economists are now re-evaluating their earlier pessimistic forecasts, with even prominent voices like Bill Dudley admitting they were too pessimistic about the risks of a hard landing for the US economy. The idea of a recession happening in the near future is now highly doubted.
Despite the positive indicators in the economy, some economists are cautious about celebrating a full recovery just yet. The key factor for many is the strength of the labor market. As long as jobs continue to be created and unemployment remains low, the economy should continue to perform well. The discourse around the soft landing versus hard landing metaphor is being criticized by Chief Economist Joe Brusuelas, who believes it’s time to focus on a robust expansion at mid-cycle instead. The overall consensus seems to be that a recession is unlikely in the current economic climate.
The unpredictability of the economy in the era of social media and 24-hour news, coupled with the effects of the pandemic, make forecasting the economy a challenging task. However, the recent positive trends in employment and prices suggest that the US economy is on a path towards stability. Economists are cautiously optimistic about the future, but the key will be to watch how the labor market continues to evolve in the coming months. Overall, the economy is currently in a state of a soft landing, defying earlier predictions of a hard landing scenario.
