NEW YORK–More than two-thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve expect the U.S. will have a recession in 2023, while two others are predicting a recession in 2024, according to a survey conducted by The Wall Street Journal.
The Journal said the firms, known as primary dealers, are a collection of trading firms and investment banks that include companies such as Barclays PLC, Bank of America, TD Securities and UBS Group. The publication said those surveyed pointed to a number of red flags, including that Americans are spending down pandemic savings, the housing market is in decline and banks are tightening their lending standards.
‘Steering into Recession’
“We expect a downturn in global GDP growth in 2023, led by recessions in both the U.S. and the eurozone,” economists at BNP Paribas SA wrote in the bank’s 2023 outlook, titled “Steering Into Recession,” according to one viewpoint cited by the Journal.
As the Journal reported and as credit unions are as aware as anyone, economists said the main culprit is the Federal Reserve, which pushed up rates seven times in 2022 to the current benchmark range of 4.25% to 4.50%, a 15-year high.
As CUToday.info has reported, the Fed signaled in December it plans to keep raising rates to between 5% and 5.5% in 2023.
Most of the economists surveyed by The Wall Street Journal said they expect the higher rates will push the unemployment level from November’s 3.7% to above 5%—"still low by historical standards, but that increase would mean that millions of Americans would lose their jobs. Most also expect the U.S. economy to contract in 2023.”
‘Shallow or Mild’ Recession
The Journal survey found a majority of the economists who expect the U.S. economy to contract are predicting it will be a “shallow” or “mild” recession, and they expect the economy and U.S. equity markets to rebound late in 2023, thanks largely to the Fed pivoting to rate cuts.
“Most outlooks predict the Fed will raise interest rates in the first quarter, pause in the second and begin cutting rates in the third or fourth quarter,” the Journal added.
Just five of the 23 financial institutions surveyed by the Journal said they expect the U.S. to avoid recession in 2023 and 2024, the report added.
“But even these relatively optimistic economists predict the U.S. economy will grow much more slowly than it has over the past 20 years,” the Journal said.
“They project growth for the year will slow to about 0.5%, on average. The economy grew at an average pace of 2.1% from 2012 to 2021.”
Still Free in ’23! The Freshest CU Headlines. Right to Your Inbox.
The biggest, best and freshest news reporting in credit unions remains free in ’23! Each morning CUToday.info delivers its daily update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com.