The media often discusses previous “soft landings” experienced by the US, citing examples such as the rate increases of 1994. Don’t believe them. Interest rates are not the economy. The US economy has never had a soft landing (although other countries have them–for instance the UK in the early 2000s.)
There’s only one sensible definition of soft landing:
Soft Landing: The labor market fully recovers from the previous recession and low inflation growth continues for at least three years.
There was one occasion (beginning in February 1966), where the labor market was fully recovered for nearly 4 years, but inflation did not stay low. The landing was so soft that we never actually landed the plane. The Fed was like a skittish fighter pilot that never touches the deck of the carrier.
Will this be our first soft landing? Who knows? The macroeconomy is basically impossible to predict. I suspect that July 2018 to July 2021 would have been America’s first soft landing, if not for Covid. (Sorry Trump, you don’t get credit for “If only”!! But Jay Powell gets two shots at it.)
Unemployment fell to 3.6% in March 2022. If it’s still in the 3.4% to 4.0% range in March 2025, and inflation is back to roughly 2%, then I’d call that a soft landing. A year ago that seemed less than a 50-50 proposition (based on history). Now that we are already 17 months into this period, perhaps the odds are up to 50-50. In other words, I have no idea.
PS. The slow growth in August’s average hourly wages makes a soft landing a tiny bit more likely.