Bank of America CEO Brian Moynihan said Tuesday he’s expecting a “mild recession” in 2023, sounding a more positive note about the state of the economy than many in the financial world have been broadcasting amid 40-year-high inflation.
Doomspeak about the possibility of a recession has been coming out of the financial sector since the summer when JP Morgan Chase & Co. CEO Jamie Dimon said he saw a “hurricane” gathering on the economic horizon as the Federal Reserve began a program of quantitative tightening, sending equity markets into a freefall.
Contractions in the gross domestic product (GDP) in both the first and second quarters of 2022 added weight to the warning, leading many Americans to believe that a recession had already begun. But economists cautioned that a strong job market and healthy levels of consumption were pushing in the opposite direction of a general downturn in the economy.
“Hurricane season is now closed,” Moynihan quipped on CNN Tuesday morning, referring to the actual Atlantic hurricane season but also not shying away from comparisons to Dimon’s remarks from earlier in the year.
“At the end of the day, the consumer has held in well,” he said. “The consumer has stayed reasonably strong because they’re employed.”
Recessions are designated retroactively by the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a think tank in Cambridge, Mass.
To make its recession calls, the committee looks at factors that include nonfarm payroll employment, personal consumption, wholesale and retail sales, industrial production and personal income.
While all these measurements play a role, the committee says that “there is no fixed rule about what measures contribute information to the process or how they are weighted in our decisions.”
While public sentiment about the economy can have a real effect on overall economic performance, economists say that it’s important to distinguish sentiment from underlying realities.
“Part of the disconnect for the general public or even a lot of economic journalists, a recession might be defined broadly as, you know, when some economic things are bad. Inflation is really bad now, for example. But economists tend to look more at questions of production, employment, real incomes. And on those measures, we’re not seeing the declines we would normally see in a recession yet,” Jeremy Horpedahl, an economist at the University of Central Arkansas, said in an interview.