Headed for a soft landing? Here’s why our economy is so unusual right now

Achievement unlocked?

The United States’ economy grew faster than expected during the second quarter of 2024, growing by 2.8% according to data released today by the Bureau of Economic Analysis. The number is an advanced estimate, and will be revised. The first quarter’s numbers showed the economy growing by 1.4%.

The numbers are fairly strong and caught many analysts and experts by surprise, especially given that the Federal Reserve’s higher interest rates appear to finally be having an effect on the economy as unemployment numbers have been steadily creeping up in recent months. The unemployment rate is currently 4.1%, up from 3.5% a year ago.

“Overall the advance second quarter GDP report was a very good one,” says Gus Faucher, chief economist at PNC Financial Services Group, in a statement provided to Fast Company. “The economy continues to expand at a solid pace even as inflation is slowing. Although higher interest rates are weighing on economic activity to an extent, the U.S. expansion continues and shows no sign of letting up.”

What’s remarkable about the gross domestic product (GDP) figures is that the Fed appears to be on the precipice of pulling off a rare feat: conquering inflation without tipping the economy into a full-blown recession. Following a fast and furious series of interest rate increases (the last increase was last summer), the economy hasn’t lost much steam, but inflation has fallen considerably—the most recent consumer price index numbers show prices increased 3% in June, down from a peak of more than 9% during the summer of 2022.

With unemployment still relatively low, and GDP numbers in the Goldilocks zone, it appears that the Fed may have nearly pulled off the “soft landing” many had hoped for. That’s only ever happened one time (arguably) in recent memory, during the mid-1990s.

As such, this does set the Fed up for a potential interest rate cut in the near future—something that the markets, and consumers, would welcome. That’s because despite the strong GDP report and other rosy economic indicators, many people are still unhappy with the current state of the economy. Many think that the country is, in fact, in the throes of a recession.

Recent data suggests that many if not most Americans still think that the U.S. is experiencing a recession. A survey of 2,000 Americans, commissioned in late June and released earlier this week by Affirm, found that roughly 60% think the U.S. economy is in a recession, and furthermore, they think that it started more than 15 months ago.

So the “vibecession” lives on—and for good reason, in many instances, despite what the data shows.