So all that recession talk Is make believe....
The recession talk in 2020-23 was speculative based on the FOMC's decision to Raise Rates to combat inflation. The underlying assumption is that the Philips curve of inflation to unemployment is reversible a certain region of the curve. [
https://www.stlouisfed.org/open-vault/2020/january/what-is-phillips-curve-why-flattened] As far as I can tell, the FOMC's decision to steeply increase the funds rate was based on this reasoning. Raising the cost of money may slow the economy and thus job growth, eventually to the point of pushing the economy into recession. This thinking is channeling Paul Volcker's 1980s Fed, as is Lawrence Summers' recent prediction that a recession would be needed to rein in inflation. Note that Volcker's management of inflation has been recently criticized by Warren Mosler (google "Mosler on Paul Volcker").
Two factors tended to invalidate Summer's reasoning, and apparently the FOMC's as well:
1) Inflation wasn't caused by strain on the labor supply. Rather it was caused by covid-necessitated, transfer payments bringing millions of minimum wage earners rapidly up to 15$/hr in conjunction with a severe, goods and services supply shock. (Had inflation been caused by a shortage of labor, then decreasing demand for labor, by pushing the economy into recession via rate increases, would indeed, ceteris paribus, be expected to bring down inflation.)
2) The Biden Administration pushed through bipartisan infrastructure bills totaling about 3 Trillion over ten years. This meant that any effort to tackle inflation by trying to induce a recession would be swimming upstream against a flood of new money being spent into the economy. Furthermore, the supply shock experienced as the nation exited from the Covid threat largely abated as people went back to work. Current unemployment numbers now approach record lows. (The lowest unemployment since the 19th Century was during WWII, keeping in mind that some who were counted as unemployed then would not be counted today.)
Putting these factors together explains why the U.S. has apparently escaped the need for a Fed-initiated recession to force down inflation. The recession bullet has been dodged for now, and a "soft-landing" has apparently been achieved. Of course there will eventually be a credit cycle caused recession. And too, it hasn't been lost on long-time observers of the U.S. economy how less likely it is that a recession will take hold during the last year of the 4-year election cycle.
