Minneapolis (CNN) The US economy is confusing: the number of jobs is rising. Inflation is cooling, but still relatively hot. Gas prices are on the rise. Consumers continue to spend and their confidence grows. But holiday sales were lukewarm. The number of layoffs at companies is increasing. Corporate profits are not great. And mortgage interest is ticking higher.
At a time when economic data has delivered mixed messages or completely outperformed expectations, economists’ forecasts for the coming year are becoming increasingly opaque.
The latest survey from the National Association for Business Economics, released Monday, shows a “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 circulated, likely reflecting a variety of opinions about the fate of the economy – ranging from recession to soft landing to robust growth,” said Julia Coronado, the president of NABE, said in a statement.
Almost 60% of 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 start was another matter: 28% said Q1, 33% said Q2 and 21% said Q3.
While the Federal Reserve’s battle against high inflation remains fierce, economists expect key inflation gauges to slow this year to hover around 2.7% to 3% in 2023 and move closer to the 2% target in 2024 .
However, creating some uncertainty among economists is what the Fed could do at the time, as well as the potential effect of external factors.
Panelists’ opinions are divided on how high the Federal Reserve can raise interest rates, how long rates can remain at their peak, when the cuts would begin, and what the central bank’s actions on each of these fronts would signal. Dana M. Peterson, NABE Outlook Survey Chair and Chief Economist at the Conference Board said in the report. “Respondents are also deeply concerned, but divided, 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.”
In terms of the labor market, which remains strong and tight, the panelists’ average forecasts for monthly wage growth this year were 102,000, a significant upward revision from December’s forecasts of 76,000 jobs per month.
NABE economists said they expect unemployment to increase, but the majority doubt it will rise above 5%.
On the housing market, they expect house prices and new home construction to continue to fall this year, meaning the start of residential construction could experience the biggest drop since 2009.
But they don’t expect the downturn to move into “bust” territory. Only 2% of respondents said a “housing market crisis” was the biggest downside risk to the US economy in 2023.
Instead, 51% of respondents said the biggest downside risk was too much monetary tightening. A long way behind in second place was the widening of the war in Ukraine, at 12%.