CHARLOTTE, N.C.– While the September jobs numbers showed a surprisingly strong employment market, economists with Bank of America are forecasting the pace of job growth will be approximately half the current rate during the fourth quarter of this year and then will turn negative.
In a meeting with clients, BofA said the Fed’s ongoing war on inflation will take a toll and that nonfarm payrolls will begin shrinking in early 2023, translating to a loss of about 175,000 jobs a month during the first quarter of next year. Charts published by Bank of America suggest job losses will continue through much of 2023.
“The premise is a harder landing rather than a softer one,” Michael Gapen, head of U.S. economics at Bank of America, told CNN. “We are looking for a recession to begin in the first half of next year.”
Unemployment will peak at 5.5%, Bank of America is predicting. Following the new September data, the unemployment rate dropped to 3.5%, tied for the lowest level since 1969.
Fed Has Different View
CNN noted the Fed is more conservative, forecasting unemployment will be 4.4% during 2023. The Fed has sent strong indication it intends to continue raising rates until it believes inflation has been tamed.
“They’ll accept some weakness in labor markets in order to bring inflation down,” Gapen told CNN.
Gapen added that although recessions tend to have “quick snapbacks,” the Fed’s stance on keeping rates high for an extended period suggests “maybe this plays out a little longer,” according to the report.
“We could see six months of weakness in the labor market,” he said.
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