Stop worrying about a recession - jobs are resilient and the Fed will achieve a soft landing, Morgan Stanley's top economist says

• The resilient jobs market will help the US economy avoid a recession, according to a Morgan Stanley economist.
• The Federal Reserve will be able to achieve its dream "soft landing" scenario, Seth Carpenter said.

The US will dodge a much-predicted recession thanks to a resilient labor market that has endured the Federal Reserve's aggressive interest-rate increases, according to Morgan Stanley's top economist.

Seth Carpenter said Monday that he's anticipating that the central bank will be able to achieve its dream scenario of a "soft landing" – where it brings inflation down to its 2% target without wiping out huge numbers of jobs.

"The labor market is one of the key stories so far this year," Carpenter, the bank's chief global economist, told Yahoo Finance. "There has been clear slowing, however, the rate of job gains has been pretty strong and we think that's been contributing to resilience spending,"

"That also means as things do cool down with the Fed rate hikes, we're just not likely to tip over into recession," he added.

The Fed raised interest rates from near-zero to over 5% between March 2022 and May 2023 in a bid to tame inflation, which at one point last year was running at four-decade highs.

But the labor market has remained resilient in the face of that aggressive tightening campaign, with the US economy adding 339,000 jobs in May and unemployment hovering at just 3.7%.

Carpenter said that while he does think the US economy is slowing, that recent jobs data shows it still is in a "pretty solid place for now".

"We are seeing job openings come down, but we're not seeing a lot of firings," he added. "I think that's reflective of the fact that you can get a slowdown in the economy and easing of pressures without there having to be really an outright contraction or a hard recession."