Betsey Stevenson, professor of public policy and economics at the University of Michigan, former chief economist of the United States Department of Labor and former advisor to President Obama, joins BNN Bloomberg for her U.S. economic outlook ahead of the U.S. Fed rate announcement. She says today’s meeting might be the hardest the U.S. Fed has faced, adding Powell will have to think hard about their forward guidance. She also discusses U.S. labour noting ’employment didn’t crack first banking did. ‘Furthermore, Stevenson says a recession will be unlikely amid growth.’

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Most likely, we won’t have a recession: Betsey Stevenson

The global economy has been engulfed in uncertainty amid the ongoing COVID-19 pandemic. As businesses shuttered, jobs vanished, and stock markets plummeted, fears of a looming recession have loomed large. However, prominent economist Betsey Stevenson believes that the probability of a recession is slim, as she offers up a glimmer of hope amidst the prevailing darkness.

Betsey Stevenson, a professor of public policy and economics at the University of Michigan, is known for her expertise in labor economics and her insightful analysis of economic trends. In her latest assessment, she argues that the current economic downturn differs significantly from previous recessions, making a full-blown recession less likely.

One of the key differences Stevenson highlights is the nature of the economic shock caused by the pandemic. Unlike traditional recessions that originate within the economic system itself, the current crisis is driven by external health factors that have resulted in lockdowns, travel restrictions, and social distancing measures. This implies that once the public health crisis is brought under control, economic recovery can be swift and robust, without the typical structural issues that result in long-lasting recessions.

Another factor that strengthens Stevenson’s argument is the rapid response from policymakers worldwide. Governments and central banks have implemented various stimulus measures, including fiscal stimulus packages and historically low interest rates, to support businesses and individuals affected by the pandemic. The unprecedented magnitude and scale of these interventions indicate a concerted effort to mitigate the effects of the crisis and provide a solid foundation for economic recovery.

Moreover, Stevenson highlights the resilience of consumer spending, which accounts for a significant portion of economic activity. Despite widespread job losses and financial uncertainty, consumers have shown a remarkable ability to adapt and continue spending, particularly in sectors such as e-commerce, online entertainment, and home improvement. This resilience, combined with increased savings rates during the pandemic, could fuel a strong rebound in economic growth once the health crisis subsides.

However, it is important to acknowledge the risks that accompany Stevenson’s optimism. The path to recovery is not without challenges. A potential resurgence in COVID-19 cases, further lockdowns, and prolonged travel restrictions could hinder the pace of recovery and even undermine the efforts made to date. Additionally, the long-term impact on small businesses and the labor market remains uncertain, as some industries may require fundamental changes to adapt to the “new normal.”

Nonetheless, Betsey Stevenson’s positive outlook serves as a reminder that while the road to recovery might be bumpy, a full-blown recession is not the only possible outcome. The unprecedented nature of the crisis requires a nuanced analysis that considers multiple factors, rather than resorting to doomsday predictions. By leveraging the lessons learned from past crises, adapting to new trends, and remaining steadfast in policy support, the world economy can emerge from this crisis stronger and more resilient than ever before.