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07/08/2022

NRF: Recession Risk Low in the Near Term

Consumers remain financially healthy now and payroll growth is sturdy, according to the association.
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Grocery carts

WASHINGTON, D.C. — Despite a slowing down of the U.S. economy, talks about a recession may be premature.

According to the National Retail Federation (NRF) Chief Economist Jack Kleinhenz, consumers remain financially healthy, and the nation is unlikely to enter into a recession during the remainder of 2022.

"I am not betting on an official recession in the near term, but the most recent research pegs the risk over the next year as about one in three and it will be touch and go in 2023," Kleinhenz said. "In the meantime, a contracting economy short of a recession is not out of the question."

As he noted, the consumer outlook over the next few months remains favorable.

"The economy is moving away from extremely strong growth toward moderate growth, but increased income from employment gains, rising wages and more hours worked is expected to support household spending," Kleinhenz added. "Policy issues will likely be the deciding factor shaping the economic outlook this year and next."

Kleinhenz's remarks came in the July issue of NRF's Monthly Economic Review, which said economic data is "softer than a few months ago" but "still signals further solid economic growth."

According to NRF, job openings and quit rates point to a tight labor market, payroll growth remains sturdy despite a slowdown in May, and the unemployment rate has remained at 3.6 percent, which is above a 50-year low seen before the pandemic, for three consecutive months.

In addition, a survey of manufacturing from the Institute of Supply Management showed that suppliers' deliveries had improved in May as demand, orders and order backlogs grew at an improved pace.

Retail sales as calculated by NRF — which exclude automobile dealers, gas stations and restaurants to focus on core retail — were expected to drop in May but remained unchanged from April and grew 6.7 percent year over year.

Sales were up 7.3 percent for the first five months of the year compared with 2021. Overall household spending, beyond just retail sales, is expected to rise 9 percent next year for a new high, the association said.

In addition, as COVID-19 eases, consumers are rebalancing their spending and adjusting shopping habits. Restaurant sales, which serve as a proxy for other service sectors like recreation and transportation that are on the upswing, were up 0.7 percent monthly in May and 17.5 percent year over year. Airline traffic is up, with the number of passengers screened at airports in the first half of June only 12.5 percent below June 2019, reported NRF.

Based in Washington, D.C., NRF is the world's largest retail trade association. Retail is the nation's largest private-sector employer, contributing $3.9 trillion to annual gross domestic product and supporting one in four U.S. jobs.