The Chicago Journal

US experts can’t pinpoint if recession will occur or not, opinions divided with shaky data

Jason Robinson Jason Robinson on September 12, 2022

Image source: Omfif

The United States has been battling an economic crisis for several months now, with the population fearing a recession.

The country also experienced two consecutive quarters of economic contraction, leaving many wondering if the US is already in a recession.

What the experts say

Many commented on the situation and offered different perspectives.

Steve Hanke, a professor of applied economics at Johns Hopkins University, believes the country will head into a “whopper” recession by 2023.

Stephen Roach of Yale University agrees that the country needs a miracle to avoid a 2023 recession but thinks it won’t be as deep as the early 1980s recession.

Richard Thaler, Nobel laureate in economics, sees nothing resembling a recession in the United States.

Thaler based his belief on high vacancy rates, a growing economy, and low unemployment.

Liz Ann Sonders, Charles Schwab’s chief investment strategist, says a recession is more likely than a soft landing for the economy.

However, a rotating recession may be needed to hit the pocket economy.

Steen Jakobsen, Saxo Bank’s chief investment officer, said the US is not headed for a recession in theory, not even in real terms. Moreover, recent polls reflect different views.

Mixed signals

US GDP fell 0.9% year-on-year in the second quarter and 1.6% in the first, consistent with the traditional definition of a recession.

The slowdown in growth was caused by factors such as government spending, falling inventories, and investment.

In addition, inflation-adjusted personal income and the savings rate have declined.

In the United States, the National Bureau of Economic Research officially announces whether the country is in recession or not.

The Bureau is unlikely to make a preliminary decision on the period in question.

The labor market’s fundamentals are stronger than in previous six-month periods of negative GDP since 1947.

William Foster, Chief Credit Officer of Moody’s, said the jobs-to-GDP ratio remains the most debated topic among economic commentators.

Indeed, the Fed is moving from an accommodative monetary policy to a tightening policy that includes rate hikes to fight inflation, which reached 8.5% in July.

“We’re coming out of an extraordinary period that’s not been seen before in history,” said Foster.

He also said that the National Bureau of Economic Research examines real household income, real spending, industrial production, the labor market, and unemployment—factors that indicate no signs of recession.

“The jobs market is still struggling to hire people, particularly in the services sector,” said Foster.

Indicators

Despite the economic climate, Foster stressed that families still spend a lot.

However, he pointed out that they were spending at a slower rate of growth, made possible by household savings thanks to the pandemic.

Economist Joseph Stiglitz has expressed concern over the decline in real wages that workers are experiencing despite the tightening of the labor market.

Commentators are divided on which metrics to focus on and which specific sectors to pay attention to.

Peter Boockbar, an investor, says the latest real estate and manufacturing data explain why the US cannot avoid a recession.

He pointed out that the National Association of Home Builders/Wells Fargo real estate market index fell into negative territory last month.

However, Saxo Bank’s Jakobsen responded to the claims by saying:

“We still have double digit increases in the rental market. This is not going to create a recession.”

“Simply, people have enough money on the balance sheet to buy an apartment and rent it out and make 20 to 30%,” he added. “So [a recession] is not going to happen.”

Reference:

Economists are divided on the risk of a US recession. And the jobs data isn’t helping

Chinese students not as keen to study in the US, could affect the country’s economy

Claire Peterson Claire Peterson on September 5, 2022

Image source: Newsweek

Many students who want to further their education have chosen to study in the United States, but in recent years, Chinese students have gradually decided to pursue other options. 

The decline in US popularity could lead to a domino effect that burns cultural, diplomatic, and financial bridges for the country.

Survey

The discovery came from a recent survey conducted by a Beijing-based private education provider, the New Oriental Education and Technology Group.

The survey had 8,610 respondents on foreign studies of Chinese students.

The researchers found that interest in the study in the United States has steadily declined in the Middle Kingdom since 2015, while interest has increased in the United Kingdom, Hong Kong, and Singapore.

The waning interest comes after more than a decade in which China has become the leading source of international students in the United States.

The number has grown over the years.

Foreign students

Most foreign students pay three times more than state students in public universities because they are not eligible for financial aid.

According to economists, Chinese students play an important role in helping universities finance other costs.

“There are many at the master’s level that are reliant on China for the revenue,” said Nikolai Roussanov, an economics professor at the University of Pennsylvania.

The Open Doors of the Institute of International Education also released a report showing that Chinese students represent 35% of all international students studying in the country in the 2019-2020 academic year.

Chinese students contributed $15.9 billion in economic value.

The decline

The declining number of Chinese students studying in the United States can be attributed to a number of circumstances that may involve political intervention or their choice.

One possibility that has been discussed is former President Donald Trump’s anti-Chinese immigration policy, while China’s strict COVID blocking policy could have been another obstacle as well.

Chinese students also reported being wary of the high levels of gun violence in the United States, high death rates from COVID-19, and growing anti-Asian racism, as reported by The Wall Street Journal’s Sha Hua and Melissa Korn.

An economist also spoke to Business Insider and said Chinese students are losing interest in US education and are threatening other aspects of the US economy; Relevant sectors include technology and finance.

“Any news about declining international demand for US education is very sensitive and should be taken very seriously, more seriously than loss of US comparative advantage in any other area arguably,” said Oleg Itskhoki, an economics professor at the University of California.

The numbers

The Wall Street Journal analyzed the survey and found that 51% of Chinese students surveyed said they planned to study in the United States in 2015.

By 2022, that number had fallen to 30%. Meanwhile, students have expressed a desire to study in the UK and the number has increased by 9%, more than double for Hong Kong and Singapore.

“One may argue that US leadership in the world is best reflected in two export services – that of finance and that of education,” said Itskhoki.

Roussanov assured that there will be no significant negative effects on the economy based on the current number of registrations.

However, he also said that the trend in poll numbers is worrying.

Roussanov pointed to the sectors in which Chinese expats enter and contribute after graduation.

Reference:

Chinese students have helped bankroll the US economy. Now fewer want to study here and it risks America’s position as a global leader

Columnist & Economist Paul Krugman Insists the US Is Not in Recession, Calls Out Media For Negative Bias

Claire Peterson Claire Peterson on August 8, 2022

Image source: UChicago Institute of Politics

For many, the ongoing state of inflation has been a shocking problem, leading people to think a recession was on the horizon.

However, experts and the government have stressed that the country is not in a recession.

On Sunday, economist Paul Krugman appeared along with CNN’s Brian Stelter in a program to say the country is not in a recession.

What they said

“Are we in a recession and does the term matter?” asked Stelter on CNN.

“No, we aren’t, and no, it doesn’t,” replied Krugman. 

“None of the usual criteria that real experts use says we’re in a recession right now,” he explained.

“And what does it matter? You know the state of the economy is what it is.” he explained.

“Jobs are abundant, although maybe the job market is weakening. Inflation is high, although maybe inflation is coming down. What does it matter whether you use the ‘r’ world or not? “

Krugman said the recession definition debate was “vitriolic.”

“I’ve never seen anything as bad as this, the determination of a lot of people to say it’s a recession is above and beyond anything I’ve ever seen,” he added.

How others feel

Paul Krugman suggested that people “want” the “Biden recession” to happen.

“Never mind the fact that you know, it in fact is not a recession in any technical sense,” he added.

Krugman said a number of voters weren’t aware that more people in the country had been “gaining jobs” and that US employment news was overly negative.

“There’s been a kind of negativity bias in coverage. The press should be giving people – people have their own personal experience. And if you ask people how are you doing, they’re pretty upbeat,” he explained.

“If you ask people ‘how is your financial situation,’ it’s pretty favorable. If you ask them ‘how is the economy,’ oh, it’s terrible. That’s a media failing.”

“Somehow we’re failing to convey the realities of what’s going on to people.”

Attempts to redefining recession

Prior to the release of the GDP numbers, members of the Biden administration appeared in the media trying to redefine the technical definition of a recession.

Journalist Glen Greenwald criticized her actions in a tweet, saying her efforts showed “a new level of audacity, no matter how low your opinion of them already is.”

“Watching them so brazenly re-define how they always used “recession,” and then Paul Krugman adding it doesn’t matter if we’re in one or not (it doesn’t matter for him), all to protect the Biden WH, is a new level of audacity no matter how low your opinion of them already is,” Greenwald tweeted.

Meanwhile, National Economic Council director and White House economic adviser to Biden, Brian Deese, continued to deny the country was in a recession, even after GDP figures were released last week.

“Well, we’re certainly in a transition, and we are seeing slowing as we all would have expected,” Deese said.

“But I think if you look at the full data and the type of data that NEBR looks at, virtually nothing signals that this period in the second quarter is recessionary.”

Reference: 

Paul Krugman declares US not in a recession, claims ‘negativity bias’ in media