Bigger Pockets: Recession Predictions: Why They’re Often Wrong, and Why the Narrative Continues to Switch

The past four years have seen the economy make its steepest correction since the Great Depression. That’s thanks to Covid-related lockdowns. And we’ve seen the fastest growth in decades, as economies opened up.

It’s understandable that investors are jittery. We’re still working through the inflation from the pandemic-era spending designed to smooth out the economy. And that’s made it easy to predict a recession when the data shows we’re not in one yet.

In early 2023, a majority of economists expected a recession within the next 12 months. That prediction has been proven wrong. And we’ve seen that the economy can absorb significantly higher interest rates.

Where does the economy stand now? Things still look strong. One sign is the labor market.

Despite some headlines about big layoffs at large tech companies, things look good. The overall unemployment rate is 3.9%, up just 0.3% compared to a year ago.

Many smaller companies are hiring, and even big tech companies are hiring employees for AI projects.

With the labor market faring reasonably well, the economy is faring well.

Plus, while inflation hasn’t been fully tamed, it’s close to 3% rather than the Fed’s target of 2%. That’s down significantly from a peak near 10%.

While rate cuts are being delayed, the Fed has ended talk of raising interest rates further.

That points to the market continuing to trend higher in the months ahead, despite any pullbacks along the way.

To read the full analysis, click here.