2023 is forecasted to be a gloomy year for the nation, according to economists. As the Federal Reserve tries to bring down the immense levels of inflation we have seen over the summer, the economy is suffering and employers have been cutting jobs in response.
Recession Chance Increases, Payrolls Decrease
Economists put the probability of a recession in the next 12 months at 63%, which was up from the previous probability of 49% from a July survey. This marks the first time the survey had a recession chance at a number above 50% since July of 2020, which was in the wake of the last recession, albeit a short one. Economists now also predict GDP (Gross Domestic Product) will contract at 0.2% annually in the first quarter of 2023 and go down to 0.1% in the second quarter. July’s survey predicted a 0.8% growth rate for the first quarter and 1% growth for the second quarter.
As far as jobs are concerned, economists predict nonfarm payrolls will decline by 34,000 per month on average during the second quarter and will continue to increase to 38,000 per month on average for the third quarter. According to the July survey, it was predicted employers were going to add about 65,000 jobs per month in those two quarters, which is a pretty drastic shift in stance.
The Reasoning Behind the Claim
The reason for this 180° turn in recession expectations is that forecasters are increasingly doubtful that the government can keep raising rates to cool inflation, without provoking sky-high unemployment rates and an economic downturn. Almost 60% of forecasters believe the government will raise interest rates so much that it will cause unnecessary economic weakness. “The coming drag from higher rates and stronger dollar is enormous and will knock off about 2.5 percentage points from next year’s GDP” growth, said Aneta Markowska, Chief Economist at Jefferies LLC. “In light of this, it’s hard to imagine how the U.S. can avoid a recession.”
Wrap Up
An economic recession and a declining job market is not something anyone wants to see, and the recent survey taken by 66 economists does not provide a positive outlook for 2023. However, this does not guarantee anything in the future, so there is still hope the country can have a more positive future than the current outlook.