A pillowy-soft landing
A recession is unlikely despite American families getting poorer in the past year.
Central bankers have hiked rates thick and fast for the past year to try and quell inflation. Bond traders had forecast an American recession was incoming. But, even though American families are poorer than they were a year ago, it hasn't arrived. Inflation-adjusted household net worth has fallen 7% in a year. In the past, this has been a decent recession indicator. But it hasn't worked this time because the labour market is strong and unemployment has stayed low.
American families are poorer in real terms because inflation has been high. Over the past year, the net worth of American households dropped 2% in nominal terms. That drop becomes 7% after adjusting for higher costs. This means that families can buy less and have less money to spend. And when one person spends less, another's income falls.
Historically, the change in household net worth has been an excellent recession forecaster. Of the eight recessions the US has had since 1960, only one didn't interse…