Signs of recession?
Report from Congressional Budget Office
- Purchasing power from paychecks fell 2.9% for middle income households during last year
- Median household income now $70,784.00 per year
- Water bills up average of $200 per quarter
- Electricity bills up $100 per month
- Middle income households experienced inflation well over 15% from 2020 to 2022
- Consumer price index up 7.1%
- Predict that jobless rate will rise from 3.7% in November, 2022 to 4.6% by end of 2023 (does not count those that have not applied for unemployment benefits)
- workforce is still “missing” more than 3 million workers who were employed before COVID struck and could be working today
- Labor force participation rate remains 1.3% lower than before the pandemic began
- Participation rate is only 62.1%
- There are roughly 6 million jobs still unfilled across the country
- Fox Business reports that one reason may be found in the lucrative benefits from a combination of extended unemployment payments and Obamacare subsidies
- In 14 states, unemployment benefits and ACA subsidies for a family of 4 with 2 people not working amounts to an annualized equivalent of $80,000 a year in wages and benefits, the study found.
- Goldman Sachs CEO David Solomon comments about impending layoffs:
o “There are a variety of factors impacting the business landscape, including tightening monetary
conditions that are slowing down economic activity”
o “focus is on preparing the firm to weather these headwinds”
o “We need to proceed with caution and manage our resources wisely”
o Up to 8% of workforce at company could be let go - Challenger, Gray & Christmas Research reports that US-based tech companies have “scrapped over 28,000 jobs for far this year”
- “To be sure a severe recession would be bearish for stocks yet given the resilience of the U.S. economy and the tight labor market, we are expecting a slowdown or shallow and brief recession,” said Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments
- “That could allow stocks to rally in the second half of 2023 (after a volatile Q1) as they look around the recession corner.”
- Job growth is expected to slow in 2023 as higher interest rates crimp investment and as more industries fully recover their prepandemic head count, but according to Julia Pollak, chief economist at ZipRecruiter, this kind of “substantial cooling” in labor market conditions will be far from recessionary.
- The Congressional Budget Office’s estimate shows the number of employed Americans will rise from 158 million in 2022 to 174 million in 2052.
- Pollak said the economy should be “comfortable with even lower numbers of job gains in subsequent years.”
- Those projections imply net job gains of only 45,000 jobs a month on average over the next 30 years, absent an increase in U.S. population growth.
- Mark Luschini, chief investment strategist at Janney Montgomery Scott, thinks the stock market is likely to bottom ahead of the actual beginning of the recession, with an anticipation of the “eventual recovery” on the other side of it.
- “We expect stocks to struggle and continue to be under pressure over the coming months or a quarter or two, before ultimately establishing a more sustainable advance, perhaps in the second half of next year”
- David Kelly, chief global strategist at J.P. Morgan Asset Management, argued that rather than falling off an “economic cliff,” such a recession would be more like sliding into an “economic swamp,” meaning it would be hard for the economy to bounce out of it.
- “prolonged period of economic swampiness should snuff out inflation and force the Federal Reserve to reverse a significant part of their 2022 monetary tightening"
- “However, the flip side is that a mild recession would likely not create much additional pent-up demand and, assuming we see only a modest increase in unemployment, the employment and income boost from a falling unemployment rate would also be less than normal,”
- “Perhaps most significantly, in contrast to each of the last four recessions, there is unlikely to be any significant fiscal stimulus to re-energize the economy.”
- “Our economists say there’s a 35% probability that the U.S. tips into recession over the next year, an estimate that’s well below the median of 65% among forecasters in a Wall Street Journal survey,” said Goldman Sachs’ economists in their 2023 outlook.
- “The U.S. may avoid a downturn in part because data on economic activity is nowhere close to recessionary.”