U.S. economists are predicting with near 100% certainty that the economy will enter a recession within the next 12 months, which is the last thing Democrats wanted to hear ahead of the midterm elections.
An economic forecast by the Bloomberg Economics model projects the probability of a recession by October 2023 to be 100%, an increase from the last report, which estimated the likelihood of a recession within the next 12 months to be 65%.
The model uses 13 macroeconomic and financial indicators to predict the odds of hitting a recession. Bloomberg predicts the chance of a recession happening in the next 11 months to be 73%, while the 10-month probability is at 25%.
Bloomberg economists said persistent inflation and expectation of continued rate hikes from the Federal Reserve are contributing to the risk of contraction.
The U.S. economy technically entered a recession in July after the real gross domestic product decreased for two quarters in a row. The Bureau of Economic Analysis said GDP — the inflation-adjusted value of goods and services for sale produced by the economy — decreased by 0.9% in the second quarter of 2022. A rule-of-thumb measure of a recession is whether GDP declines in two consecutive quarters.
At the time, the Biden administration waved away recession concerns, citing strong jobs numbers reported throughout the summer. President Joe Biden has continued to insist that while a recession is possible, it is unlikely. Last week, Biden told CNN that if there is a recession, it will be "very slight."
On Saturday, Biden called the economy "strong as hell" while eating ice cream in Portland, Oregon.
"I’m not concerned about the strength of the dollar. I’m concerned about the rest of the world. Our economy is strong as hell," Biden said. "Inflation is worldwide. It’s worse off than it is in the United States. So the problem is the lack of economic growth and sound policy in other countries, not so much ours."
White House Council of Economic Advisers member Jared Bernstein separately told "Fox News Sunday" this weekend that government revenues are rising as a result of "how strong this economy has been."
"We have an unemployment rate that is 3.5%. There is no recession that would prevail with that kind of unemployment rate. We’re obviously adding hundreds of thousands of jobs per month. We have consumers who still have pretty strong balance sheets. We still have job vacancies. … We actually think the probability for a soft landing is good," Bernstein said.
Meanwhile, an economic report last week said that inflation rose more than expected in September, with headline inflation at 8.2%, near a four-decade high. While Americans who want jobs may have them, they are being squeezed, as every dollar they earn purchases less and their savings depreciate.
A recent New York Times/Siena College poll found that the economy or inflation ranks as the top issue for a plurality of voters. Voters concerned with the economy and inflation think Republicans will handle the issue better than Democrats 64% to 30%.