Tom Barkin, President of the Federal Reserve Bank of Richmond, recently tackled the looming question of a potential recession in a speech at the Montgomery County Chamber of Commerce on August 3, 2023. While acknowledging that recessions are an inherent part of economic cycles, Barkin urged caution in predicting their timing.
"…one can never fully rule out a recession — it’s just a question of timing," Barkin emphasized. He highlighted the recurring nature of discussions about a recession, humorously noting, "This has been called the most predicted recession in memory." Forecasts have repeatedly pushed the expected recession further into the future.
Despite concerns over inflation and the Federal Reserve's moves to counteract it, Barkin underscored the economy's resilience. He pointed to solid GDP growth, driven by consumer spending, rising wages, and a strong job market. Unemployment stands at a low 3.6 percent, with consistent job creation.
Barkin attributed the absence of a recession to adaptable businesses and sustained consumer spending, aided by pandemic-related savings and job opportunities. Government investments in infrastructure further buoyed the economy.
Addressing the Fed's fight against inflation, Barkin acknowledged its painful impact on industries while affirming its necessity. "Inflation remains too high. And if there is one thing we have relearned over the past two years, it is that inflation is painful, and everyone hates it," he stated.
Barkin closed by considering potential scenarios for a recession. He noted that while unforeseen shocks are unpredictable, most recessions typically strike unexpectedly, causing a simultaneous pullback in consumer and business activities.
Barkin offered hope that if a recession occurs, it might be less severe due to proactive measures taken by businesses, consumers, and governments to prepare for economic challenges. He suggested that the current economic strength could partly result from these preparations, potentially bolstering consumer sentiment.
In conclusion, Barkin acknowledged the inherent uncertainty in economic forecasting. However, he reaffirmed the Fed's primary objective: controlling inflation, which, if unmanaged, could inflict greater harm on the economy over time.