The Case for a Soft Landing: How High Inflation Could End Without a Recession

Leading economists, including Larry Summers forecast that a recession is approaching. Half of Americans think the United States is already part of it, according to a Wall Street Journal poll. Chairman of the Federal Reserve Jerome Powell stopped talking about a « soft landing, » when the economy slows enough to bring inflation down but doesn’t raise unemployment much, and started warning about the pain.

The gloom felt justified. In March, I wrote that the odds were against a soft landing. Still, the odds are not zero, and they may have improved with Friday’s report that job growth continued in August as wage growth eased and the labor force has widened. Economists at Goldman Sachs have long been in the soft landing camp, putting the probability of a recession in the next 12 months at 33%. That’s higher than normal, but lower than the average of nearly 50% of economists surveyed by The Wall Street Journal. To understand why Goldman expects a soft landing, I spoke to its chief economist, John Hatzius.