- Executives at major US companies have slowed down warnings of a coming recession.
- That’s according to a Goldman Sachs analysis of US company earnings calls.
- It’s another indicator the US economy is holding strong.
Companies have stopped talking about a recession. It’s another sign that the US economy might avoid a downturn this year.
During the recent round of fourth quarter earnings calls, executives at only 12% of businesses in the Russell 3000 — an index that tracks the US’s 3,000 largest publicly traded companies — mentioned the term “recession,” according to a Goldman Sachs note published last week.
This was down considerably from the previous quarter’s decade-high peak of nearly 45%, when it seemed like everyone was forecasting a downturn. 91% of CEOs predicted a recession was coming over the next 12 months, according to a KPMG survey conducted in July and August of last year, and many economists and investors were right there with them.
—Sam Ro 📈 (@SamRo) February 13, 2023
While the earnings calls data point isn’t a perfect indicator, it’s far from the only positive signal for the US economy. While prices are still higher than the Federal Reserve would like, headline inflation has fallen for seven straight months, and the unemployment rate is at its lowest level since 1969.
It’s led some experts to grow more optimistic about the chances of a “soft landing,” in which inflation returns to more modest levels while the economy avoids a deeper downturn. Goldman Sachs, for instance, recently cut its odds for a recession over the next year from 35% to 25%.
”Continued strength in the labor market and early signs of improvement in the business surveys suggest that the risk of a near-term slump has diminished notably,” the bank’s researchers said in a note earlier this month.
The US economy isn’t out of the woods just yet, however. Economists surveyed by the Wall Street Journal in January, for instance, put the odds of a recession in 2023 at 61% on average. Additionally, last month’s inflation report came in a bit hotter than expected, and if this trend continues, the Fed may choose to keep raising interest rates and slow the economy.
“The disinflationary process, the process of getting inflation down, has begun,” Federal Reserve Chair Jerome Powell said earlier this month, but added, “It has a long way to go. These are the very early stages.”
Not every company is optimistic that the US will avoid a recession either. The Goldman Sachs note, for instance, listed 10 corporations that predicted a recession this year on their most recent earnings calls, including Bank of America, Citigroup, McDonald’s, JP Morgan, UPS, and Tesla.
Even if the US doesn’t technically enter a recession, this doesn’t mean it will be entirely unscathed. There’s a good chance the economy could still see slower growth and an uptick in the unemployment rate. While it hasn’t made much of a dent in unemployment data yet, many companies have done layoffs in recent months.
It’s also possible the global economy on the whole could fall into a recession, even if the US manages to avoid one.