Research shows that gig workers tend to work in the service industry. “Specifically, fewer restaurant takeout orders and grocery deliveries as the economy has reopened, and a shift from goods to services spending could mean less gig work at delivery and social commerce marketplace platforms.”īut it could also be a supply-side issue. “In our view, the recent decline partly reflects lower demand,” wrote analysts. So is the height of the gig economy behind us? It’s possible that the economy sees disinflation in a way that it hasn’t in previous cycles.”ĭuring the pandemic, the share of Bank of America customers who received income from gig-type jobs grew three times higher, the bank wrote in a recent note.īofA saw gig-type income through direct deposits or debit cards slip to 2.7% in February 2023, from a high of 3.3% in March 2022. “There are dynamics in the post-Covid world that are weird: The labor market not behaving in ways we would have expected it to at this point. “This is a challenging business cycle to read,” said Jolly. Job loss is minimal as wage growth decelerates alongside inflation.Ĭhina’s reopening has positive spillover effects and is, on balance, disinflationary for core goods. Inflation continues to fall without much need for Fed tightening, and interest rates peak at 5%.
This would be the ideal and, according to Jolly, least likely scenario. Scenario 3: Soft Landing - 20% probability
Labor markets remain exceptionally tight and wage growth re-accelerates, adding to sticky inflation levels.Ĭhina’s reopening, meanwhile, ends up being inflationary for core goods.Īs inflation grows again, central banks are forced to hike rates even more, sending the United States into recession in the second half of 2024. In this scenario, key global central banks pause their rate hikes in response to the banking crisis. Scenario 2: Delayed Landing - 30% probability “If the US sneezes, the world catches a cold,” said Jolly. But that would be quickly stymied by the recession. The red-hot labor market would loosen quickly, and layoffs would be widespread.Ĭhina’s post-Covid reopening sent a boost through the global economy. That would catapult the United States into recession during the second half of 2023 (Europe and the UK will feel it even earlier). This imagines what would happen if the Federal Reserve hikes interest rates two or even three more times as the banking turmoil in the United States and Europe cause credit conditions to tighten significantly. It certainly isn’t the best-case scenario. Scenario 1: The credit crunch - 50% probability Here are the three possible scenarios - and the probabilities that they happen - that Jolly’s team has mapped out:
The Federal Reserve Headquarters are pictured on Main Washington, DC. Two things are very apparent, Jolly told CNN: “A recession sooner or later remains more likely than not,” and “the longer-term outlook, post-shakeout, remains relatively positive for equities - we just have to get past a volatile reset first.”
Through a combination of their own subjective views, along with quantitative and qualitative market analysis and some historical perspective, they’ve attempted to clear some of the clouds that make what comes next for the economy so uncertain. Once they come to an agreement on what could happen, they aggregate and build charts that show the balance of risks across economic variables and financial metrics. Want to know what the future holds for the US economy? You’ll have to consult your crystal ball.īut if that doesn’t work, Jake Jolly, head of investment analysis at BNY Mellon Investment Management, has outlined three possible scenarios, each considering the impact of the banking crisis, the “stickiness” of inflation, and the path of rate hikes by the Federal Reserve.Įach year, Jolly and his team debate scenarios for the economy going forward.
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