Deloitte: A US Recession Remains ‘Unlikely’

MajorsMar 24, 2016

Deloitte: A US Recession Remains ‘Unlikely’

What is likely, however, is that the economy will keep growing at its current slow, and some would say unsatisfactory, pace.

New York--A report released this week by Deloitte states that the chance the United States will slip into another recession is slim but so is the probability that growth will pick up substantially.

In its U.S. Economic Forecast published online Tuesday, Deloitte stated that, “The likelihood of a recession remains low but the highest probability is that the slow, unsatisfactory growth of the post-recession period in the U.S. is the economy’s new normal.”

In the forecast, the New York-based professional services firm sketched out four different possible future paths for the U.S. economy and then placed subjective probabilities on each.

The least likely scenario is recession, with Deloitte putting the odds of another massive slowdown at only 5 percent.

The scenario Deloitte pinpointed as being the most likely, at 55 percent, is “the baseline,” where U.S. domestic demand is strong enough to provide employment for workers returning to the labor force, unemployment hovers around 5 percent and annual GDP growth is capped at about 3 percent.

The two other scenarios outlined were slower growth (25 percent) and a coordinated global boom (15 percent).

Deloitte’s U.S. economic forecast, which was published online Tuesday, also delved into specific sectors of the economy, including consumer spending.

According to the report, the U.S. consumer, the “longtime supporter of the global economy,” has remained surprisingly resilient but has begun saving more money, not spending like they did in the early 2000s.

Deloitte said it expects the U.S. savings rate to settle in at just over 5 percent, which is consistent with the amount of money consumers saved in the 1990s.

The report also noted that while there has been job growth and wages have picked up a little too, the consumer still faces a few obstacles.

Chief among them are the number of homeowners who remain “underwater” on their mortgages, baby boomers nearing or at retirement with inadequate savings and the growing wealth gap.

The Deloitte report states that, “As long as a large share of the gains from technology and other economic improvements flows to a relatively small number of households, overall U.S. consumer spending is likely to remain relatively restrained.”  

The report was authored by Daniel Bachman, a senior manager for U.S. macroeconomics at Deloitte Services LP.

Download a PDF of the entire forecast on the Deloitte University Press website.

Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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