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Assessing the Current Risks to the U.S. Economy

Russia’s invasion of Ukraine occurred just as pressures in the U.S. economy appeared to be peaking, and the prospects of a soft landing were good. The days, weeks, and months ahead will bring more clarity about how it impacts the U.S. economic cycle. A recession is not a foregone conclusion, and companies should stay flexible, reassessing their outlooks and tactics as events unfold.

This research was published on March 14th, 2022 in HBR

Before Russia’s Feb. 24 invasion of Ukraine, the outlook for the U.S. economy was stressed but hopeful. Pandemic pressures appeared to be peaking, inflation was widely expected to normalize, and the Fed stood a credible chance of engineering a “soft landing.”

But an enormous humanitarian atrocity in Europe has triggered an unpredictable global financial and economic conflict that will see consequences ricochet. Though new risks have emerged, and uncertainty is higher, at present the main impact of the crisis on the U.S. economy is the exacerbation of existing pressures and risks. The path of inflation, and the policies to contain it, remain the main threat to the cycle. While that risk has gone up, it need not be a recessionary outcome.