Fed Soft Landing/Recession: Probability of recession is high

June 4th, 2022

“A labor market view on the risks of a U.S. hard landing” – Alex Domash and Larry Summers

Labor markets are at historic levels of tightness – as indicated by the elevated job vacancy and quits rates – which has led to record-level wage growth in recent months. In a recent NBER working paper, former treasury secretary Larry Summers and M-RCBG research fellow Alex Domash show that elevated wages will likely make it more difficult for the Fed to achieve a soft landing for the economy: Every time wage inflation is above 5% and the unemployment rate is below 4%, as they are now, a recession has followed within two years. Read the NBER Paper.