>>> WE'VE BEEN TALKING ABOUT RECESSION FEARS FOR OVER A YEAR NOW BUT RELIEF CAN BE ON THE WAY. FOR MORE ON THIS WE HAVE RICK NEWMAN WITH US, A SENIOR COLUMNIST AT YAHOO FINANCE. GOOD TO SEE YOU. >> HEY GUYS. >> SO NOT TOO LONG AGO, WE WERE TALKING ABOUT A POSSIBLE RECESSION. WHAT HAS CHANGED? >> WE HAVEN'T HAD ONE, THAT'S WHAT'S CHANGED, IN FACT WE ARE SUPPOSED TO BE IN A RECESSION RIGHT NOW. IF YOU GO BACK TO LOOK AT WHAT SOME OF THE FORECASTS WERE THIS TIME A YEAR AGO, WE SHOULD BE IN A RECESSION, AND IT KEEPS NOT HAPPENING, SO, NOW, THIS RECESSION FORECAST, IT KEEPS GETTING PUSHED OUT BY ABOUT NINE MONTHS, SO WHAT ECONOMISTS SEEM TO BE SAYING NOW IS MAYBE BY THE END OF THE YEAR WE WILL BE IN A RECESSION, AND IF NOT THEN, MAYBE BY THE BEGINNING OF 2024 BUT IF THE PATTERN HOLDS, WE WILL STILL NOT BE IN A RECESSION THIS TIME NEXT YEAR. >> FOR A WHILE THERE, THERE WAS THINKING WELL THIS MIGHT MEAN THAT THE FED WOULD MAYBE STOP RAISING INTEREST RATES BUT THEN WE HAD ALL THESE ISSUES WITH BANKS AND CONCERNED ABOUT WHETHER OR NOT CREDIT WOULD DRY UP. AND SO, HOW MIGHT THIS INFLUENCE THE FED? DO WE HAVE A SENSE OF WHERE THEY MAY BE GOING WHEN IT COMES TO INTEREST RATES? >> THERE'S A LOT GOING ON HERE AND IT GETS CIRCULAR BECAUSE ONE THING CAUSES ANOTHER AND THEN IT COMES BACK TO THE FIRST THING AND SO ON. BUT THERE'S A GOOD CHANCE THE FED IS DONE RAISING INTEREST RATES. AND THE REASON IS, THE FED HAS BEEN RAISING INTEREST RATES TO SLOW DOWN ECONOMIC ACTIVITY AND GET INFLATION UNDER CONTROL AND INFLATION IS FALLING. IT PEAKED AT 9% LAST JUNE AND IT'S DOWN TO 4.9%, AND THAT'S STILL TOO HIGH BUT THERE IS A LAG IN THE EFFECT OF FEDERAL RESERVE INTEREST RATE HIKES, CALLING ABOUT NINE MONTHS, SAY THERE'S A NINE MONTH LAG, SO THE RATE HIKES AT THE FED HAS DONE THIS YEAR, PROBABLY HAVE NOT FLOWN THROUGH INTO THE REAL ECONOMY AND INTO INFLATION, SO THERE'S REASON TO THINK THAT INFLATION IS GOING TO CONTINUE TO COME DOWN AND WHO KNOWS, IN A YEAR, IT MIGHT BE BELOW 3% WHICH WOULD BE GOOD ENOUGH FOR THE FED, PROBABLY. >> FOR ORDINARY FOLKS WATCHING THIS, INFLATION COMING DOWN, RECESSION FEARS WANING, THE QUESTION BECOMES, ARE BUSINESSES CHANGING THEIR CORPORATE STRATEGIES? FOR EXAMPLE, YOU SAW SOMETHING I THOUGHT WAS INTERESTING, SHAREHOLDERS FOR NETFLIX REJECTED A CEO EXECUTIVE COMPENSATION. YOU HAVE COMPANIES THAT ARE STILL PAYING THEIR CEOS MILLIONS OF DOLLARS BUT THEY ARE LAYING OFF THOUSANDS OF WORKERS. WE SEE THAT NOT JUST ACROSS MEDIA BUT IN A BUNCH OF DIFFERENT SPACES INCLUDING TECH AND RETAIL. SO WITH RECESSION FEARS WANING, AND KNOWING THAT BUSINESSES ARE REACTIVE, WELL THEY AT LEAST STEM THE LAYOFFS IF NOT, START HIRING AGAIN? >> THE DATA IS IN CONFLICT WITH ITSELF BECAUSE THERE ARE LARGE LAYOFFS, HUNDREDS OR THOUSANDS OF EMPLOYEES AT SOME BIG COMPANIES BUT WHEN WE GET THOSE MONTHLY JOB NUMBERS, THOSE ARE NEW JOBS ADDED ON, SO THOSE NUMBERS INCLUDE ALL THE LAYOFFS, AND THERE'S ALWAYS COMPANIES THAT ARE GETTING RID OF WORKERS AND REDUCING EMPLOYMENT BUT ECONOMIES CAN'T EVEN BELIEVE HOW STRONG THE LABOR MARKET IS. I THINK PART OF WHAT IS GOING ON IS THE ECONOMIC MODELS ARE KIND OF BROKEN. COVID MESSED THINGS UP. WE'VE HAD A HUGE DROP IN THE ECONOMY FOLLOWED BY A HUGE BOOM IN THE ECONOMY AND THESE ECONOMIC MODELS THAT FORECAS RECESSIONS JUST AREN'T WORKING, SO, THE BOTTOM LINE, REALLY IS, AS LONG AS YOU HAVE A LABOR MARKET AS STRONG AS WE HAVE RIGHT NOW, 3% UNEMPLOYMENT, VERY LOW AND HUNDREDS OF THOUSANDS OF NEW JOBS EVERY MONTH, YOU REALLY CANNOT HAVE A RECESSION WITH THE LABOR MARKET THAT STRONG. >> SO, HERE'S MY QUESTION. THE ECONOMY GOES THROUGH CYCLES. ARE WE ALWAYS KIND OF AT A SLIGHT RISK OF A RECESSION? IF WE GO UP TOO HIGH, WE HAVE TO COME DOWN. >> YES! WE ARE ALWAYS AT A RISK OF RECESSION AND I LOVE THIS INDICATOR THAT A LOT OF ECONOMISTS USE, THEY CALCULATE THE RISK OF A RECESSION, AND THEY DON'T TRY TO CALCULATE AND SAY WE WILL HAVE A RECESSION TODAY BUT THEY TRY TO FORECAST WHETHER WE WILL HAVE A RECESSION IN SIX MONTHS OR 12 MONTHS. AND EVEN DURING THE BEST OF TIMES, THE RISK OF RECESSION IS LIKE 10%. SO, IT IS A FACT. WE ARE GOING TO HAVE A RECESSION AT SOME POINT IN THE FUTURE. SO IF YOU WANT TO BE RIGHT, JUST SAY, WE WILL HAVE ANOTHER RECESSION BUT DON'T PUT A TIME FRAME ON IT. IT'S THE TIMEFRAME THAT EVERYBODY KEEPS GETTING WRONG. SO WE WILL HAVE ANOTHER RECESSION. THERE'S A LOT OF WHAT'S CALLED EXCESS SAVINGS FROM WHEN PEOPLE ARE NOT GOING OUT DURING COVID AND THEY JUST BANKS MORE MONEY, THERE'S A LOT OF THAT LEFT. PEOPLE ARE STILL USING THAT TO BUY STUFF. THAT IS PROPPING UP THE ECONOMY. AT SOME POINT THAT EXCESS SAVINGS WILL BE EXHAUSTED, MAYBE THAT WILL BE THE THING THAT TIPS US INTO A DOWNTURN BUT LET'S STOP TRYING TO TALK OURSELVES INTO A RECESSION AND
