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Economists face off about where the country is headed this year

ARI SHAPIRO, HOST:

In case you hadn't heard, the Super Bowl is this weekend, with Kansas City and Philadelphia facing off in a test of skill and grit on the field. Well, there's a different, slightly less glamorous face-off going on right now in the field of economics. And we've all got skin in the game, as NPR's Stacey Vanek Smith reports.

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STACEY VANEK SMITH, BYLINE: Welcome to the economic Super Bowl of 2023, where economists face off about where the country is headed. The two teams - team recession and team soft landing. At stake - what this year is going to hold for all of us, our jobs, our finances, our futures.

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UNIDENTIFIED SPORTSCASTER #1: What a turn of events here.

SMITH: Last year prices seemed to be spiraling out of control. The Federal Reserve stepped in and did drive back inflation, but the economy also took a hit. Question is, how much of a hit? Are we in the recession red zone? To help us tackle this question, we have our team captains - first up, Dana Peterson, chief economist at The Conference Board.

DANA PETERSON: We have to look at data. I mean, we do have these forward-looking indicators, and all of them are saying recession.

SMITH: Team recession. That is what Peterson sees in the data right now. But she has a challenger - from the University of Michigan, economist Justin Wolfers.

JUSTIN WOLFERS: You're talking to an economist who is going to be happy and tell you that I see really good things.

SMITH: So, are you team soft landing?

WOLFERS: I'm just team America.

SMITH: He's team soft landing. So two teams, one economy, thousands of screaming data points - let's move the chains. Kicking us off is team recession. Economist Dana Peterson says the red flags are everywhere - manufacturing, construction, the housing market, but most importantly...

PETERSON: The consumer.

SMITH: The consumer, us. We are the star quarterbacks of the U.S. economy. Our spending makes up more than 70% of the economy. When we spend less, the economy shrinks. And Peterson says it looks like that's happening. With prices rising, a lot of households have cut back.

PETERSON: Consumer spending data for December was not great. And businesses - if they get this whiff of weakness ahead, they're going to pull back.

SMITH: But the silver lining here is that so far this recession looks mild. The economy is taking a hit but is not getting sacked.

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UNIDENTIFIED SPORTSCASTER #2: And here's the hit. Man alive. Brady's up. That's good to see, but...

SMITH: But there is another team on this turf, a team that believes the U.S. economy can pull off the Hail Mary pass of slowing down enough to bring prices down but not enough to pancake economic growth - team soft landing. Justin Wolfers says he is betting on the MVP of this economy - the job market.

WOLFERS: We're celebrating unemployment being at a 50-year low. This is only three years after the scariest economic moment of my lifetime.

SMITH: Aka the beginning of the pandemic, when unemployment rates hit 14%. Wolfers says last year was an economic comeback story. Inflation came down, the economy grew, and the job market thrived.

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PAT RYAN: He's got it.

MIKE KEITH: 20, 10...

RYAN: He's got it.

KEITH: ...Five - touchdown Titans.

UNIDENTIFIED SPORTSCASTER #3: A miracle.

WOLFERS: If you had said in three short years we'll yield an unemployment rate that earlier generations of economists had said was impossible, I wouldn't have believed you.

SMITH: Wolfers says this economy has shown it has grit and hustle and we should just relax and take the win. But economist Dana Peterson points out it is still the first quarter of the year, and every sports fan knows things can turn around very fast.

PETERSON: You know, show me the money. We need to see the data (laughter). And we don't have a lot right now.

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KEITH: Titans have a miracle left in them. If they do, they need it now.

SMITH: Peterson says we're just too early in the game to make the call. Stacey Vanek Smith, NPR News. Transcript provided by NPR, Copyright NPR.

Stacey Vanek Smith
Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.