72% of Economists Warn of a Recession in 2023
All eyes are on the Federal Reserve as it fights the worst inflation in four decades with aggressive interest rate hikes. Most economists (73%) expect the Fed to be unsuccessful in taming inflation in the next two years without triggering a recession, according to the National Association for Business Economics (NABE). 72% predict a recession by the middle of next year, if we are not already in one, per the survey.
Recessions are historically defined by two consecutive quarters of negative economic growth and characterized by high unemployment, falling income and slowing retail sales, according to the National Bureau of Economic Research (NBER). While GDP has declined for two quarters, NBER will likely wait to confirm a recession since unemployment is low and consumer spending is still strong.
"There are conflicting signs about the economy's health, fueling debate over the state of the economy: the number of Americans filing for unemployment benefits has gradually increased, companies have announced layoffs or hiring freezes, and the housing market is softening," reads an article from Fox Business. "At the same time, unemployment fell to a near-historic low of 3.5% in July, and consumers are still spending heavily, despite scorching-hot inflation."
Federal Reserve Chairman Jerome Powell argues that there is still a possibility to control inflation without triggering a full-blown financial crisis. "We think it's necessary to have growth slow down," he said in July. "We actually think we need a period of growth below potential in order to create some slack so that the supply side can catch up."