This article is reprinted by permission from NerdWallet. The latest bevy of government data shows prices are declining, wage growth has slowed and people aren’t spending like they used to. By all appearances it seems inflation is, indeed, being tamed. But at this point it’s still uncertain whether the U.S. is in the clear or instead glimpsing a recession on the horizon.
Kathryn Anne Edwards, an economist, independent policy consultant and adjunct at Rand Corp., uses a “bad week” analogy to describe the economic situation. “In this fight against inflation, we’re in a perpetual state of Wednesdays,” Edwards says. “It’s midweek. We know we’ve had kind of some bad days and we’re on the hunt for any further evidence of how this week is going to go, but it’s not Friday yet. By Friday we’re going to know if it’s been a terrible week or not; by Wednesday it could still go either way.” In an ideal scenario, inflation keeps trending downward without meaningfully increasing unemployment. Prices stabilize and we celebrate avoiding another recession. That’s a distinct possibility, since the labor market continues to remain incredibly tight even in the face of higher prices for you-name-it. Unemployment is at an astounding low of 3.4%, quit rates remain elevated and job prospects are abundant even as wage growth moderates and layoffs start to hit certain industries. “The verdict is still a little bit out, but it’s leaning toward a brighter economic picture,” says Nela Richardson, chief economist at ADP Research Institute. All in all, it looks like economic conditions are starting to head in the directio …