- Sean Sneath predicts the US is on its way to a ‘noodle pot stagnation’
- He says this stagnation can come and go gradually, just like the shape of a bowl of noodles
- He also adds that a “noodle pot stagnation” could help the Fed fight inflation by reducing supply chain demand.
- Many economists now believe that we are on the way to – or are already in – a mild recession, although forecasts differ
The American economy is in a strange place. Despite ongoing supply chain crises, spiraling inflation and waning consumer confidence, no one can fully agree if a recession is on the horizon. While many economists expect a recession could Speaking of, conflicting economic data suggests that we may be out of any major downturn altogether.
But now, there is a file TRUE Assessment Expert: The Man Who Accurately Predicted the End of the Great Recession in 2009.
Sean Snaith is director of the Institute for Economic Forecasting at the University of Central Florida. He is also a national economist and is widely considered an expert in economics, forecasting, analysis, and market size.
Snaith’s quarterly reports and timely economic forecasts have prompted Bloomberg News to name him one of the most accurate economic forecasters in the country. And now, more than a decade after coining the “gravy stagnation,” he’s back with more economic characterizations related to food.
Enter: Give up the pasta pot.
stagnant pot noodle
In his latest economic forecast, Sean Sneath noted that the country appears to have been in recession for about a year. Moreover, it is expected that such a moderate economic decline is Just What we need to overcome our inflation problems.
Recession by any other name
The name “dish noodle slump” comes from economists’ love of using metaphors to describe what recessions look like. This often involves taking letters from the English alphabet, such as V, U, and L-shaped slacks. (There is also a W-shaped slack, or double-shelled slack, which occurs when another slack follows. Some have argued that we are on the path correct for a W-shaped recession next year).
In his latest economic analysis, Snaith noted that we appear to be heading toward something resembling a mild recession. But, given our unique circumstances, none of the above descriptions were appropriate. Therefore, he abandoned the most common alphabetical classification for another.
Snaith—who previously coined the term “gravy stasis”—has found that food-related terms hold the answer once again. He wrote that after discovering that “the English alphabet does not contain a letter capable of describing our drop…we retreat into the culinary world to find a description of what that slack and upturn must look like. So, without further ado, we present to you: the stagnant pot of pasta.”
About the shape of things
So why do we call slack a common cutlery?
Snaith explains that pasta bowls are “wide, low, and shallow—basically high-walled, and featuring the best that bowls and bowls have to offer.”
And that’s exactly what he expects from the next recession.
Snaith believes the United States already has, or will slowly slide, into a shallow recession. He predicts it won’t be as deep, but it will probably last for four quarters, which is the “wide part of the pasta pot”.
Snaith also notes: “When we come out of this recession there will be no rocket-propelled recovery as we saw in 2020. We will slowly get out of the bowl of pasta the same way we entered. This recession will start and end with a moan.”
Finally, Snaith expects the potential recession to last for about a year.
Expert forecasts by numbers
To examine the potential effects of the pasta pot recession, let’s take a look at some of Snaith’s economic forecasts.
Initially, Snaith expects real GDP to decline slightly before recovering. In 2020, GDP fell at -3.4% before rising to 5.7% last year. Current models suggest real GDP could decline by as much as 1.4% this year, contract in 2023 and 2024, and rise to 1.8% in 2025.
These fluctuations are likely driven by consumer spending, which makes up about 69% of GDP. Low consumer confidence, 40-year high inflation and uncertain 3-year inflation outlook are the main reasons the economy may experience a recession.
To accompany his GDP figures, Snaith sees consumer spending declining from 7.9% in 2021 to 0.4% in 2023. By 2025, consumer spending could rise to 1.5%. In addition, salary job growth of 3.7% this year is likely to decline to -1% by 2024 before recovering to about 0.6% in 2025.
Finally, Snaith notes that a tight housing market plagued by high mortgage rates, high prices and very low inventories continues to erode demand. Housing starts are expected to fall by about 0.2 million by next year, and that number could hover around that level over the next three years.
“The cure that heals what’s bothering our economy”
Sean Sneath also predicts that the pasta pot slump “may also just be a cure-all for what’s troubling our economy.”
In particular, Snaith sees a mild recession as a way to correct an overheating economy marred by sharp price hikes and supply chain problems. In theory, a moderate slowdown would give the Fed time to “stop inflation” while giving the global supply chain time and space to correct.
And while past recessions have literally brought economies to a halt, a pasta pot slump may come with much lower economic and personal costs.
“blood in water”
During the Covid-19 pandemic, the government has launched unprecedented fiscal stimulus to combat the impact of the lockdowns.
At the same time, the Federal Reserve unleashed near-zero interest rates and quantitative easing. The result was an astronomical recovery in financial markets and a ballooning balance sheet to $8.9 trillion.
These policies “had the same effects as blood in the water with sharks,” in part fueling the spending frenzy that continued nearly 18 months after the shutdowns ended. This consumer spending helped pull the economy out of the Covid-19 recession. Unfortunately, between rising spending and supply chain difficulties, it has also contributed to rising costs for gas, food, and housing.
Now, the Fed has to catch up — often in ways that negatively affect investors as it tries to ease the burdens on consumers. As a result of his belated response, Snaith sees the Fed raising interest rates at each of its remaining 2022 meetings in “significant increments.”
At the same time, a looming recession may provide the Federal Reserve’s aid, which could allow it to mitigate interest rate hikes earlier than expected.
Millions of jobs could cushion the blow
With about 11.4 million jobs available in the United States and a low turnover rate, employees enjoy unprecedented job security. At the same time, the unprecedented employee market placed strong upward pressure on wages and salaries.
Going into a slump, that many slots isn’t necessarily a bad thing.
Keep in mind that before the 2001 recession, about 5.1 million jobs remained open. In the months leading up to the Great Recession, that number dropped slightly to 4.6 million.
This leaves our current situation with more than twice as many jobs before a possible recession. With so many vacancies, companies have the ability to unlock rather than (or in addition to) conduct layoffs, allowing inflation to fall without catastrophically increasing unemployment.
However, Snaith sees unemployment rising from 3.6% to 6.5% by late 2024 before beginning to decline gradually in 2025.
Is a recession possible?
Snaith believes that “the US economy is very close to recession, if not already in.” However, no one has made an official statement (and that may not come until after the data is entered, anyway).
However, banks and economists continue to raise the odds of a mild recession – although consensus remains elusive.
For example, Richard Kelly, head of global strategy at TD Securities, said Monday that the United States has a greater than 50% chance of seeing a recession in the next 18 months. He cites rising fuel costs, a hawkish Federal Reserve, and a slowing economy among the greatest downside risks.
Similarly, Nomura released a report last month declaring that a recession is “now likely.” And investment firm Muzinich believes a recession is not “if”, but “when”.
On the other hand, David Roach, president of Independent Strategy, sees a recession as far-fetched, given that the US labor market remains strong. Nearly 30% of economists surveyed by Fortune believe a recession won’t happen until 2024.
Although there is no consensus, economists expect the Fed will prepare for further rate hikes. Many experts believe that the CPI for June will show inflation rising at 8.8% y/y.
However, White House inflation data suggests that these numbers will be out of date and not worth panicking, as they do not reflect the recent drop in energy prices.
Gravy and pasta – you name it, we’re here for it
All this talk of food and stagnation is making us hungry — for an economical wallet.
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