According to a study published by The WSJ on Monday, which cited its most recent poll of experts, it is very probable that the United States will enter a recession within the next calendar year.
The analysis indicates that the risk of a recession occurring in the United States during the next twelve months has increased to 63%, which is an increase from the 49% probability that was anticipated in the last WSJ poll in July.
According to the opinions of the surveyed economists, the Federal Reserve’s attempts to curb inflation by increasing the key rate of interest have resulted in a rise in the associated risks. The Federal Reserve has lifted the target range for the federal lending rate to between 3.00 and 3.25% after increasing it by 75 percentage points during each of its three most recent meetings, the most recent of which was in September. More than half of the analysts who responded to the poll said they anticipate the Federal Reserve will raise interest rates further and may even do “too much,” which would be detrimental to the economy. They anticipate a 0.2% decrease in the country’s gross domestic product (GDP) during the first 2 quarters of 2023, in contrast to the previous poll, in which they anticipated a 0.8% increase in GDP during that same period.
It is reasonable to anticipate that a weakening economy will have an effect on the labor market, given that businesses will be required to reduce the number of positions they fill. It is anticipated that the number of people employed in nonfarm payrolls would fall by approximately 34,000 each month in the 2nd period of 2023 and so by 38,000 / month in the 3rd quarter. The current unemployment rate of 3.5% is projected to increase to 3.7% in the month of December, and then to 4.3% in the month of June 2023.
“The Reserve Bank is making the choice between the lesser of 2 evils – take a downturn with a rising unemployment rate today or risk a rather more caustic and entrenched rising price taking root,” Diane Swonk of KPMG said to the news outlet. “Take a recession with an increase in unemployment today and risk a more corrosive or entrenched inflation taking root.”
A majority of analysts believe that a recession will last for a very little period of time, anywhere between six and eight months and that growth will resume in the United States economy by the end of the following year.