WASHINGTON—The current strength of the labor market may keep the country from a recession this year, CUNA is forecasting.
CUNA Senior Economist Ligia Vado, in the trade association’s June 2023 CUNA Economic Update, expressed optimism that the Federal Reserve’s efforts in the past year-and-a-half will pay off.
“In our most recent economic forecast for credit unions and the economy, we updated our prediction to a scenario that is more in line with a soft landing of contracting monetary policy,” said Vado. “That is a scenario in which the Federal Reserve can tame down inflation without causing a recession. The main reason for this change in the forecast is the strength of the labor market.”
Vado cited labor market trends that she said are affecting the CUNA forecast:
- With a moving average of 269,000 jobs additions monthly, current job additions still signal a very robust labor market
- The unemployment rate was 3.7% in May, the same as pre-pandemic levels, increasing from 3.5% the previous month
- Labor force participation decreased more than three percentage points during the COVID-19 pandemic and has then slowly increased
- Month over month job growth, combined with the lower labor force participation of two large age groups, has produced an imbalance in the labor market, with demand exceeding supply by a factor of 1.7
- Wages are on an elevated trend. Notably for credit unions, financial activity wages are the highest ranked among all industries
“Strong labor market translates to stable disposable income for consumers, which boost aggregate demand and propels economic growth,” Vado said.