Economist calls ‘no landing’ scenario a near impossibility

There’s a new buzzword in vogue amid the recession scare. This is called a “no landing” scenario, but one economist said it’s very unlikely economists would throw out their textbooks even if it did.

What is No Landing? According to Sal Guatieri, senior economist and economic director at Banque de Montréal, it’s first important to understand the exact opposite of a “hard landing.”

“Economists usually use the term to describe a fairly typical recession or worse, a 2-4% contraction in GDP and a 2-4% unemployment rate,” Guatieri told by phone. “It means a standard recession that could go up.” Monday.

Guatieri also defined another situation known as a “soft landing”. This is if the central bank cuts inflation to target or restores price stability without a recession.

“We can avoid a recession, but we need to slow and weaken the economy to the point where the unemployment rate rises a little bit,” he said.

“Essentially, the central bank is trying to achieve potential economic growth, weak enough to keep inflation under control, but still leading to rising unemployment.”

In other words, a soft landing is when the economy isn’t growing fast enough to keep up with all the people looking for jobs.

“And of course there are non-landings, situations that have never been seen before in history,” Guatieri said. “Maybe Gensokyo”

A “no landing” scenario is one in which the economy continues to grow above normal, unemployment remains low, markets remain tight, and “inflation magically cools, returning to the 2% target, where If you stay.

“Basically, it refutes everything we’ve learned in economics,” Guatieri said. “If we see things like that continue, we can throw away our economics textbooks.”

“Nothing is impossible now. I mean, it’s always possible for something like that to happen, but historically it’s very rare.”

From a probability standpoint, Guatieri has a near zero chance of not landing, which is well below the 15% chance he will attribute to a typical recession and the 35% chance of a soft landing.

“What we’re looking for is something in between a hard landing and a soft landing, which is a mild recession,” he said. [In this scenario], the economy will go into recession, but it will be very shallow, very short-lived, just a few quarters. The probability of such a situation is about 50%. “

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button