The combination of a record drop in labor productivity and high inflation in the first half of 2024 may have given way to a new economic phenomenon: a “job-filled” recession, says UCF economist Sean Snaith.
Although many economists, and certainly politicians, hated using the word “recession” last year, Snaith compares it to the “unemployment recoveries” of the early 1990s and 2000s in his latest book Quarterly forecasts for the United States Released this morning.
And another recession may come, says Snaith, director of the UCF Institute for Economic Forecasting.
But unlike previous recessions, the job market has continued to grow in the face of other economic losses — unprecedented, Snaith says.
“In the housing crash of 2008 and the COVID-19 recession, the job market was cut to the bone,” he says. “There is still a lot of fat in this job market even with the current slowdown.”
Snaith points to other signs of an impending recession. He adds that extreme interest rate hikes by the Fed and concerns surrounding recent bank meltdowns are adding pressure, which has been building as inflation erodes consumers’ purchasing power.
The second meal of the “noodle bowl slump”
Last year, Snaith coined another term, which is “noodle bowl stagnation,To describe what he saw as a shallow slide into stagnation—and eventually a gradual exit from it.
It appears that the United States may step in for a short period of time to help this year.
“I don’t think this will turn out to be an economical version of the never-ending bowl of noodles at Olive Garden,” Snaith says, “but a lot of indications are that we’re on the verge of another relatively short and relatively shallow recession.”
Eventually, the slowdown in the US labor market will become more noticeable.
“While the job market showed few signs of recession in 2024, a second pasta bowl recession wouldn’t be harmless,” he says. “We will see unemployment rise as 2023 progresses, all the way into 2025. Job growth will turn negative but not as severe as it was in the aftermath of the 2008-09 and 2020 recessions.”
Among Snaith’s forecasts lining silver is a slow decline in consumer inflation through the end of the year. By the end of 2024, inflation will be close to the Fed’s 2% target thanks to higher interest rates and a second pasta bowl recession.
Some additional highlights from Snaith’s latest four-year US forecast include:
- US consumers provided the force driving the recovery for 2020. After most lockdowns ended, consumers were ready to spend. Since then, rising energy prices, food costs, and housing costs have steadily eroded their purchasing power. While credit card debt has temporarily corrected the gap in their monthly balance sheets, this loss has set the table for the next service of the “noodle slump.”
- Real GDP growth was -2.8% in 2020 but accelerated to 5.9% in 2024. It eased to 2.1% in 2024 and will slow further to 0.4% in 2023 before slowly picking up to 0.8% in 2024 and then to 1.3% in 2025 and 1.8% in 2026.
- The housing market remains tight. Rising prices combined with higher mortgage rates eroded demand. However, the still low inventories will support the sector. Housing starts will decline from 1.6 million in 2024 to 1.1 million in 2023 and 2024 before rising to nearly 1.3 million in 2026.