The AtlanticThe Atlantic

The simple mistake that almost triggered a recession

By Adam Ozimek

05 Jul 2023 · 4 min read

informed Summary

  1. Economists have previously suggested that the only way to combat inflation would be to increase unemployment, potentially triggering a recession. However, recent data shows that inflation has decreased significantly, even with low unemployment rates, suggesting that a recession may not be necessary.

For some time now, prominent economists have warned that the only way to break the fever of inflation would be by pumping up unemployment—in other words, by triggering a recession. Former Treasury Secretary Lawrence Summers, for example, predicted last summer that we would need five years of unemployment above 5 percent. Against that backdrop, every strong jobs report came to seem, perversely, like bad news—an omen of greater financial pain to come.

And yet according to the most recent official numbers, inflation has cooled significantly since last summer, even as the unemployment rate has remained low. Inflation so far seems to be conquerable without throwing millions of Americans out of work. A recession is looking less and less likely, let alone necessary. So where did the doomsayers go wrong?  

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