Prominent economists including Larry Summers predict a recession is coming. Half of Americans think the U.S. is already in one, according to a Wall Street Journal poll. Federal Reserve Chairman Jerome Powell has stopped talking up a “soft landing,” when the economy slows enough to bring down inflation but not push unemployment up much, and has begun warning of pain.
The gloom has felt justified. In March, I wrote that the odds don’t favor a soft landing. Still, the chances aren’t zero, and they might have improved with Friday’s report that job growth continued in August while wage growth eased and the labor force expanded. Economists at Goldman Sachs have long been in the soft-landing camp, putting the probability of a recession in the coming 12 months at 33%. That is higher than normal but less than the nearly 50% average of economists surveyed by The Wall Street Journal. To understand the reasons Goldman expects a soft landing, I talked to its chief economist, Jan Hatzius.