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Do recent positive developments qualify as a 'soft landing' for the economy?


And it's an especially good morning because we're starting with good news. There's been a string of positive economic reports in the U.S., stronger growth than expected, a pretty resilient jobs market. And inflation has continued to cool - so much good news, in fact, that the U.S. economy may be headed toward what the Federal Reserve's been hoping for - a soft landing. That means inflation has been brought under control without triggering a recession. NPR business correspondent David Gura joins us now. Hi, David.


RASCOE: So, David, is this it? Is this the soft landing?

GURA: So look - I think we can all agree that this has been a journey as the Fed Reserve has tried to get historically high inflation under control by cooling down the U.S. economy without kickstarting a recession, which is such a tricky thing. The Fed has been raising interest rates really aggressively with the goal of making people and businesses spend less. Of course, that can lead to layoffs, and the challenge here is not going overboard.

The Fed doesn't want to see mass layoffs, and they have clearly been making some progress. You know, just about a year ago, inflation was astronomically high. It was above 9%. It's now a third of that. And I think it's worth us remembering how the Fed has tried to bring that down. The Fed has made it so much more expensive to borrow money in a very short period of time. In a matter of months, interest rates have gone from 0 to 5.25%, the highest that they've been in decades.

I put your question to Diane Swonk, the chief economist at KPMG. I said, you know, given all that the Fed's done, how far we've come and that inflation is down significantly - we don't have a recession - is this that elusive soft landing? Here's what she said.

DIANE SWONK: We're not there yet, but the hope is certainly high that we could get there.

GURA: She says, we've hit a pocket of nice air. The flight has gotten a little bit smoother. I think we're getting to that moment when there's that announcement to put your tray tables up and your seat backs in their upright position.

RASCOE: OK, but then it can take 30 minutes before they actually land. Like, it's a long (laughter) time - lot can happen in that. So we're maybe in the final approach, and that's got to be a good thing, though, that there's been so little economic turbulence lately, right?

GURA: Yeah, we have started our descent, but we still don't know how smooth or bumpy the landing is going to be and, to your point, how long we're going to circle before that landing...

RASCOE: (Laughter).

GURA: ...Takes place. I think that there are still some unknowns despite all of the economic data we've seen lately trending in the right direction. Look. On the positive side, we learned this past week the economy grew faster than Wall Street economists expected in the last few months. That's a good thing. But a lot of economists say we still don't know how these higher interest rates are going to affect the overall economy. We saw some immediate effects. Higher mortgage rates slowed down the housing market.

What Dana Peterson is paying close attention to are our spending habits in the second half of the year. She's the chief economist at The Conference Board.

DANA PETERSON: Certainly, when we ask consumers, what are you thinking about in terms of buying services, they're saying that they're going to buy fewer things that they want and more things that they need.

GURA: That may be what they're saying, but it seems like right now, at least, they're still buying things they want. Now, many Americans are still eating out. They're still traveling, staying in hotels. And a critical question is, what's going to happen when they cut back? Another big question is, what will happen in a few weeks when millions of us have to start paying back our student loans after pausing them during the pandemic?

RASCOE: We've talked a lot about a soft landing. How hopeful are economists that we can avoid the alternative, a recession?

GURA: The mood has changed for the better. There is much more optimism. And many private forecasters - these are economists who work for financial firms - have been revising their economic outlooks given the recent data that we've seen. A soft landing is still by no means a sure thing, but they think it's more and more likely. You know, the Fed just raised rates again by another quarter point after it took a pause in June.

And Fed Chair Jerome Powell told reporters he still believes there is a path to a soft landing. He thinks he and his colleagues can do what they need to do without triggering a deep downturn - that he can avoid a recession. And he said something notable about the Fed's staff of economists. This is a big group. There are hundreds of them. Powell says they expect slower growth.


JEROME POWELL: Given the resilience of the economy recently, they are no longer forecasting a recession.

GURA: Now, at his news conference, Powell said he is not comfortable using the word optimistic to describe how he's feeling, says he recognizes things could change on a dime. And like many economists, he's reluctant to make too much out of a few good data points. But we are definitely hearing the word recession a lot less than we were, Ayesha, and there is still a lot more talk about avoiding one.

RASCOE: NPR's David Gura, thank you so much.

GURA: Thank you. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Ayesha Rascoe
Ayesha Rascoe is the host of Weekend Edition Sunday and the Saturday episodes of Up First. As host of the morning news magazine, she interviews news makers, entertainers, politicians and more about the stories that everyone is talking about or that everyone should be talking about.
David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.
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