Goldman Sachs has upped the odds of a recession beginning over the next year to 35% as the world economy keeps struggling to bounce back from COVID due to a number of reasons. Despite these rising odds of economic calamity, a local economist told WWL there are still reasons to be confident we’ll avoid the worst-case scenario.
“I don’t think you can say actually there will be a major recession, I do think there will be a slowdown, and I think that slowdown will last over a number of months, it will not go away overnight,” LSU Economist Dr. Jim Richardson told WWL.
Despite a strong week last week major stock indexes are still down 5-10% on the year. Inflation doesn’t appear to be slowing, supply chain and energy supply issues related to the Russian invasion of Ukraine persist, and major Chinese cities are going back on lockdown.
Despite this cascade of blows, Richardson said numbers like employment show the economy is still fundamentally strong. Because of that, the biggest variables that could influence a major economic downturn are further chaos overseas, and the Fed getting overly aggressive with rate hikes.
“That I think is an issue of how well they play that game, and we don’t have a lot of experience with that,” said Richardson.
The Fed is set to meet another six times this year after raising rates last week for the first time since 2018.
