Economic data shows that U.S. economic growth remained steady in the last quarter of 2022. In December, payrolls rose by $223,000 while the unemployment rate fell to 3.5% and average hourly earnings eased by 0.3%, per Wells Fargo. Job openings fell to 10.46 million in November. Not only that, "ISM manufacturing fell to 48.4 in December, while the services index unexpectedly dropped to 49.6," the report reads. Construction spending increased by 0.2% in November and the U.S. trade deficit "narrowed to $61.5 billion in November."
Despite this positive trend, economists are forecasting a modest contraction in growth in mid-2023 due to high inflation and monetary tightening. According to J.P. Morgan, the Federal Reserve will have delivered a cumulative adjustment of close to 500 basis points on rates through the first quarter of 2023. "Central bank activity is clouding the outlook for next year somewhat as the Fed, followed by other major central banks, is expected to pause hikes by the end of the first quarter of 2023," the article reads.The U.S. economy is to expand at a muted 0.5-1% pace in 2023, as measured by real GDP, according to another J.P. Morgan article. "Which incorporates our prediction for a mild recession beginning in late 2023. This would be a further deceleration in growth from 1.5-2% in 2022, 6% in 2021, and the longer-term average annual growth rate of 1.8%," the article reads.