Apollo Management‘s chief economist, Torsten Sløk, expressed concerns about the possibility of a soft landing for the U.S. economy, a scenario he previously championed. He now sees it as the least likely outcome.
What Happened: In a Bloomberg interview on Monday, Sløk stated that the chances of a soft landing for the U.S. economy are now less than 50%. This shift in perspective is due to ongoing economic data, including the easing of financial conditions, reported Business Insider.
“I think there’s now a higher than 50% chance that we either have a hard landing or no landing. In other words, the fragile soft landing is really now almost the most unlikely scenario,” Sløk said.
The economy has seen an increase in the issuance of high-yield and investment-grade bonds, a revival in the IPO market, and a rise in mergers and acquisitions. These changes have also bolstered the job market, with January witnessing a significant increase of 353,000 jobs in the U.S.
However, the effects of the Federal Reserve’s rate hikes are still being felt, slowing down consumer spending and business and bank lending. High-interest rates have made borrowing more expensive, particularly in sectors like commercial real estate.
Sløk described the current state of the economy as a delicate balance between these opposing forces. He concluded that what appears to be a soft landing is “a fragile equilibrium.”
Why It Matters: This shift in perspective from a soft-landing advocate like Sløk is significant, given the recent economic indicators. In January, there was an unexpected slowdown in private job growth, which was seen as a precursor to a soft landing by some economists.
Earlier, Mizuho strategist Dominic Konstam warned of an inevitable hard landing for the US economy, predicting a significant spike in unemployment rates by the end of the year. He postulates a potential rise in unemployment rates to 6% or 7% by year's end, a sizeable increase from the current low of 3.7%.
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