The risk of a nationwide recession is rising in states across the US, according to latest research published this week by the Federal Reserve.
A complete of 27 US states show signs of weakening economic activity scientists from St. Louis Fed.
The agency’s report cites data tracked by the Philadelphia Fed’s statewide coincidence index, which uses 4 variables linked to the labor market, productivity and inflation to measure economic conditions in individual states.
“Taken together, the threshold estimates based on this evaluation show that 26 states should have negative growth in the SCI to have reasonable confidence that the national economy has entered a recession,” St. Louis Fed in a report that failed to discover shaky states.
Researchers at the Fed of St. Louis noted that, on average, 26 states showed negative growth during the last six recessions dating back to 1980.
The report could possibly be another excuse for growing concern amongst investors that the US economy has slipped into recession after a series of sharp increases in rates of interest by the Federal Reserve. Critics of the central bank argue that its measures to curb inflation are too radical.
Today, conditions are barely higher than when the US economy plunged into recession at the starting of the COVID pandemic. In March 2020, 35 states went negative on the State Convergence Index, although the economy bounced back to growth in a brief period of time.
The report said the Great Recession was an “exception” compared to other recent economic crises. According to St. Louis Fed, only nine states showed negative growth in January 2008.
“It wasn’t until the collapse of Lehman Brothers in September 2008, which caused stock prices to fall sharply and economic activity across the economy to decline, that a recession was considered highly likely by most economists. By October 2008, 47 states had negative SCI growth, the researchers said.
The researchers also noted that some recessions “were more nationwide than others.”
“All states experienced recessionary conditions in some unspecified time in the future during the 2007-09 and 2020 recessions, while only about two-thirds of the states experienced negative growth during the 1990-91 recessions,” they said.
Earlier this month, Fed Chairman Jerome Powell said he still sees a way for the economy to achieve a “soft landing” and avoid recession – though he acknowledged that the future is uncertain.
“I do not think anyone knows if we’re going to have a recession or not, and if that’s the case, whether it’s going to be deep or not. You only don’t comprehend it,” Powell said.
The Fed has signaled that there shall be more rate hikes in 2023, albeit at a slower pace than the exceptionally large hikes seen this yr.
With postal wires