Will the U.S. Dodge a Recession?: Kiplinger Economic Forecasts

The labor market is healthy enough to dodge a recession, even though job growth is lethargic.

To help you understand what is going on interest rates, inflation and job growth, and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest… 

The August jobs report looked not too hot, not too cold for the Federal Reserve. Job growth is slowing enough to stay the Fed’s hand at its September meeting when it will decide whether to raise interest rates again. We think it’ll stand pat because it appears the economy is slowing enough to keep inflation trending down.

But the labor market is still healthy enough to keep recession odds low. Employers added a solid but not spectacular 187,000 jobs. Gains for June and July were revised down, but still look decent. Pay increases are slowing but still high. This is what the Fed wants to see: Slower growth, but not a downturn.

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If that pans out, look for interest rates to hold around their current level. Even if it thinks no more hikes are needed, the Fed will be in no rush to make cuts. Wall Street will be glad to dodge a recession but isn’t keen on rates staying high.

On inflation, watch for an unsettling upturn later this year. The main reason will be the result of comparing prices in November and December of this year to those two months in 2022 when inflation softened a bit. That will worsen the year-over-year comparison.

What’s more, the government is changing how it calculates healthcare price increases, which will likely tack on 0.1% to the overall CPI figure from October through March 2024. The Fed is unlikely to sweat this looming pickup from both of these statistical issues.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter. 


David Payne
Staff Economist, The Kiplinger Letter

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.