“Recessions are part of it, the economy comes in waves, and recessionary periods are part of the whole,” says BNR in-house economist Han de Jong. “But I’ve never seen so many economists really excited about an approaching recession.”
According to De Jong, there are a number of factors that could explain the enthusiasm for the recession. “We have more inflation than we would like and we have a very tight labor market. A recession can help solve both problems.’
Limited pain
Economists predict the upcoming recession will be “short and mild.” Whether this will be the case remains to be seen, underlines De Jong. ‘But a short, mild recession will ease the pain of the recession, because there is going to be one. And so economists can’t wait for it to arrive».
The Amsterdam stock market shows growth of more than 8% in the run-up to this period. The question is whether there is a connection with current economic times. “Short-term movements in the stock market are always difficult to explain,” says De Jong.
Yet there is yet another explanation for the possible excitement in the stock market. “The year has just begun, perhaps investors were a little more pessimistic at the end of the year than they are now. But what also plays a role is that corporate profits also fall into a recession. However, if that recession is really short and mild, then the decline won’t be too severe.’
Acetaminophen
The big question is, of course, whether the recession will really be, as they say, short and mild. “This is an almost heroic hypothesis of economists, because one never knows for sure”, underlines De Jong. ‘And once the economy drops into negative territory, a negative dynamic can emerge and take on a life of its own. And then things can happen that don’t stop short and sweet.’
This only fuels De Jong’s surprise at the enthusiasm for a recession. ‘We have a structural problem in our labor market. A recession will reduce labor shortages, but it is not a sustainable solution. It’s more of a paracetamol, because when the economy recovers, the labor shortage will be back in no time.”