Counter arguments to a recession​

By Jake Rickman​

What do you need to know this week?

An op-ed by a Financial Times columnist published on Monday takes a contrary position to the dominant perspective that the global economy is in the midst of a recession (or at the very least, close to it).

The author’s starting point is that economists as a general species have failed to accurately predict a single recession in the United States since 1970. Given that more than 60% of polled economists now believe a recession is highly likely, it might follow that a recession will not in fact happen based on their track record to date.

At face value, this is hardly a bulletproof argument. However, the author does go on to list a multitude of macroeconomic indicators that might imply we are not on the cusp of a global recession.

Notably, shipping prices are dropping and the delays that have plagued the world’s ports since the first lockdown are showing early signs of easing. If this continues, this will alleviate the supply-side factors contributing to inflation, the surging rate of which has been at the forefront of central banking monetary policy for the past twelve months.

In the event of a warm winter and/or a ceasefire in Ukraine, energy prices may return to more sensible levels, which would also curb one of the most substantial inflationary pressures facing the global economy (though there is no guarantee this will happen).

In parallel, despite the US Federal Reserve’s series of rapid rate hikes to counter inflation, the unemployment rate (at least in the US) is lower than economists expected . This flies in the face of the presumption that a slowing economy should be reflected in higher rates of unemployment.

Additionally, the author asserts (though without evidence) that disposable incomes are rising in line with inflation, which should counter the most severe effects of inflation on consumer spending.

The author does concede that there are other factors that paint a less cheery forecast, but he concludes by saying that a recession is not necessarily inevitable despite what the markets and economists otherwise suggest.

Why is this important for your interviews?

To the extent that the TCLA commercial newsletter has developed a stance on the matter, it has leaned towards the supposition we are either headed towards a recession or actively in one . This article therefore gives us a chance to consider some counterarguments to the notion that we are in a recession (or close to one).

Considering the merit of these points is in turn a useful way to improve your preparation for interviews. This is because the format of interviews intended to test your commercial knowledge are often structured so that interviewers can elicit your underlying thought-pattern. What matters is not so much the answer that you arrive at, but how you get there.

In practice, interviewers often do by raising counterpoints to your argument. For instance, if you adopt the position that we are in a recession, an interviewer might counter by raising some of the points proffered in the FT’s article.

As a general preparation strategy, by anticipating the weak points in your argument, you can refine it and better rebut any competing arguments. This will contribute to the impression you give interviewers that you are sufficiently well-versed in a given commercial subject as to appreciate the strengths and weaknesses of a given position.