Recession may not be on way, say economists

WASHINGTON — Is the United States at risk of enduring another recession, just two years after emerging from the last one?

For now, most economists don’t foresee a downturn in the near future.

Despite the inflation squeeze, consumers — the primary driver of the economy — are still spending at a healthy pace.

Businesses are investing in equipment and software, reflecting a positive outlook. And the job market is still booming, with hiring strong, layoffs low and many employers eager for more workers.

“Nothing in the U.S. data is currently suggesting a recession is imminent,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote Tuesday. “Job growth remains strong and households are still spending.

That said, Farooqi cautioned, “the economy faces headwinds.”

On Wednesday, the Fed is set to raise its benchmark interest rate, which affects many consumer and business loans, by as much as three-quarters of a percentage point. That would be the Fed’s largest rate hike since 1994, and it could herald the start of a period of especially aggressive credit tightening by the central bank — and with it, a higher risk of recession.

Analysts say the U.S. economy, which has thrived for years on the fuel of ultra-low borrowing costs, might not be able to withstand the impact of much higher rates.

The nation’s unemployment rate is at a near-half-century low of 3.6%, and employers are posting a near record number of open jobs.

Yet even an economy with a healthy labor market can eventually suffer a recession if borrowing becomes costlier and consumers and businesses put a brake on spending.