Minneapolis (CNN) The US economy is confusing: jobs are rising. Inflation has cooled but is still running relatively hot. Gas prices are recovering. Consumers continue to spend and their confidence grows. But the holiday sales were tepid. Corporate layoffs are on the rise. Corporate profits are not outstanding. And mortgage rates are ticking higher.
At a time when economic data has been sending conflicting messages or exceeding expectations, economists’ forecasts for the year ahead are becoming increasingly opaque.
The latest survey by the National Association for Business Economics, released Monday, shows “significant divergence” among respondents about where they think the U.S. economy is headed in 2023, the organization’s president said.
“Estimates of inflation-adjusted gross domestic product, or real GDP, inflation, labor market indicators and interest rates are all widely available and likely reflect a variety of opinions about the fate of the economy – from recession to soft landing to resilient growth. ‘ said Julia Coronado, President of NABE, in a statement.
almost 60% of survey respondents said they believe the US has a greater than 50% chance of entering a recession in the next 12 months.
When such a recession would begin was another question: 28% said first quarter, 33% said second quarter and 21% said third quarter.
As the Federal Reserve’s fight against high inflation continues to play a major role, economists expect key inflation indicators to slow this year, landing at around 2.7% to 3% in 2023 and approaching the target of 2% will approach.
However, what the Fed might do during this time and the potential impact of external factors are causing uncertainty among economists.
“Panelists’ opinions are divided on how much the Federal Reserve could raise interest rates, how long interest rates could stay at peak levels, when cutbacks would begin, and what the central bank’s actions on each of these fronts would signal,” Dana M. Peterson, Chair of the NABE Outlook Survey and Chief Economist of the Conference Board, in the report. “Respondents are also very concerned but divided in their opinions about the implications of other issues that could affect the US economy, including the impact of China’s reopening on global inflation and the looming debt ceiling.”
Regarding the job market, which remains strong and tight, the panelists’ median forecast for monthly wage growth this year was 102,000, a significant upward revision from December’s forecast of 76,000 jobs per month.
NABE economists said they expect unemployment to rise, but the majority doubt it will exceed 5%.
On the housing front, they expect home prices and new home construction to fall further this year and forecast housing starts could see the biggest drop since 2009.
But they don’t expect the downturn to veer into “bust” territory. Just 2% of respondents said that a “home market bust” was the biggest downside risk for the US economy in 2023.
Instead, 51% of respondents said the main downside risk is excessive monetary tightening. Far behind in second place was the spread of the war in Ukraine at 12%.