First of all, we must qualify this headline with the important caveat that a recession is not a sure thing. However, so many economic forecasts are banking on a recession in 2023, we must at least acknowledge the possibility of a recession this year. The vast majority of these forecasts are predicting “mild” recession. At the very least, we are expecting slower growth in the coming year.
Should there be a recession, not only is the severity in question, but different industries are likely to be affected disparately. We know that job growth should slow since we have recovered the jobs lost during the pandemic. Close to full employment, the pace should wind down naturally. December’s job numbers actually came in higher than expected, capping a year of very strong job growth in which the economy added approximately 4.5 million jobs and ended with a low unemployment rate of 3.5%. The pace of job growth has slowed, but the numbers are still solid.
We also know that the housing market has slowed significantly. Whether we can term this a housing recession or just a pause is still to be determined. We do know that a slower housing market will affect the rest of the economy as many industries are connected to housing. Of course, the state of housing is connected to interest rates and if the housing industry causes the economy as a whole to slow down, it stands to reason that interest rates could ease a bit even if the Federal Reserve keeps short-term rates high. That is what could contribute to the “coming” recession being on the mild side, if it comes at all.
OriginationPro/The Hershman Group