Experts Now Saying A Recession Won’t Happen?

Despite many experts believing that a recession is on the horizon, 3rd quarter earnings reports revealed that a vast majority of businesses are still doing very well suggesting that only a mild economical contraction may occur.

By Brian Scheid | Published

With 3rd quarter earnings data starting to make its way into the hands of economists around the world, we are starting to hear a change in their direction regarding the looming recession they have been predicting to hit the United States economy for the last 18 months. This is a dramatic shift in rhetoric that has dominated the 24-hour news cycle day and night. Most of us have been preparing for its arrival by working out our budgets and cutting expenses that are not core to our household operation.

Whether it’s a few of the streaming services or possibly your favorite snack from the grocery store that you did not buy on your last shopping visit, as everyone battened down the proverbial hatches as we wrapped up 2022. This is a positive development and it may be too early to tell with the scope of the rest of the world hanging on our Central Bank’s December meetings to see if they hold or reduce the rising Prime interest rate or maybe they reduce it. After the 2nd quarter’s underwhelming earning reports were released many corporate CEOs were convinced that it was inevitable a recession was hiding just over the horizon.

Some of the 3rd quarter data that fuels this 180-degree turnaround by economists, first off is that 69% of all S&P 500 companies surpassed their projected earnings per share. An astonishing 71% of all the S&P 500 companies beat the expert’s revenue estimates. However, those performance numbers are both below the 5-year and 10-year averages which is a decrease in performance but it also doesn’t make a case for a complete unraveling of the United States economic system. Most of the economic pundits are now saying that instead of a severe recession we are going to experience a mild contraction of the economy.

According to CNN Business Jeffery Roach the Chief Economist for LPL Financial said, “The narrative has been honed: if we fall into recession, it’s not going to be deep and dramatic. Earlier this year, CEOs were worried, markets were completely impaired and volatility was elevated because there was uncertainty about the looks of a potential recession,” That is being reflected in corporate CEO’s earnings calls where they are using the dreaded “R” word 26% less on those calls in comparison to the second quarter of this year.

Economists are predicting the largest wage increase season in 15 years as companies are being quoted as saying they are forecasting increases will average in the 4.6% range for most employees. That message always sounds great to employees around the country, but the unfortunate piece of all of this is the national inflation percentage is coming in for the year at 7.7%. This means your paycheck will see a noticeable difference in the total amount of funds deposited each pay cycle.

Unfortunately, that additional money will buy you less merchandise than you could have gotten a year or so ago unless your labor raise amount tops up over that 7.7% inflation rate. Then you would be earning more buying power than you had in the previous year. That is the tough part about inflation and recession is the impact on everyone’s mental health because it is difficult to experience meeting with your superiors and getting this incredible raise, only to go to the grocery store and not be able to get all the staples that your family needs.

We will continue to monitor this situation and continue to prepare for something but instead of an Economic Hurricane that CEO of JP Morgan predicted back in June. Recently JP Morgan economists Michael Feroli and Daniel Silver are feeling that if a recession occurs at all it will be short and shallow. In layman’s terms, it would be like crossing through a kiddie pool as opposed to traversing an ocean.