Page 9 - April 2023

Bloomberg cites the downturn in housing and the The Federal Reserve Bank of Philadelphia’s Survey of
current spate of tech layoffs as proof points for a Professional Forecasters has U.S. GDP declining in only
rolling recession. one quarter this year, and even then, by only 0.1 percent.
Much of the economic news supports the possibility The Wall Street Journal’s survey of U.S. economists
that a recession can be avoided. has the probability of recession this year at 61 percent.
• Job growth remains robust. The U.S. added The Journal forecasts a mild contraction in Q3 with
517,000 jobs in January, more than double what growth resuming in Q4.
economists forecast. What’s hidden in the detail of the Journal’s survey
• Unemployment remains low. The rate fell to 3.4 is that one-fourth of the respondents don’t expect any
percent in January, the lowest since May 1969. decline in ’23. This includes economists at well-respected
• The labor market is tight. U.S. employers had 11.0 firms like Credit Suisse, Goldman Sachs, Morgan Stanley,
million open positions in December, well above the National Association of Manufacturers, the National
the 6.5 million average in the years prior to the Association of Realtors, Northern Trust, and Societe
pandemic. Generale.
• Despite a rash of tech layoffs, there’s been no This lack of consensus may be why The Washington
surge in initial claims for unemployment benefits. Post published an opinion piece in late February with
The four-week average fell to 189,500 in mid- the headline “Don’t Believe What Anyone Says About the
February, down from 209,000 for the comparable Economy. Even Me.” The article notes:
period in ’22. • Current economic data is confusing because it
• Consumers continue to spend. U.S. retail and food points in all directions.
service sales for January topped $697.0 billion, up • The confusion is fertile ground for partisans who
3.0 percent from the previous month. use the data to serve their own agendas.
• Factory activity has picked up. In December, new • How one feels about the economy depends on one’s
orders for manufactured goods rose $10.0 billion or personal situation, i.e., good data is cold comfort
1.8 percent to $552.5 billion. Orders have risen in to someone who lost their job or whose business is
four of the last five months. being strangled by inflation.
• And the housing market is recovering. Sales of
new single-family homes hit a seasonally adjusted So, what does the Partnership make of the data?
annual rate of 616,000 in December, 2.3 percent • Given the tight labor market, a recession is still
above the November estimate of 602,000. possible but less likely.
• Inflation remains stubbornly high, so the Fed will
Not all the news is positive, however. keep raising interest rates.
• New home construction remains weak. In January, • The Fed’s actions will have the greatest impact on
housing starts fell 4.5 percent compared to rate-sensitive sectors of the economy. Construction
December. will wane. Property owners will struggle to service
• Overall construction is down. The total activity for their debts. Loan defaults will escalate.
December slipped 0.4 percent below November levels. • The drop in labor force participation and lack of a
• Inflation remains stubbornly high. The Consumer coherent immigration policy will prolong worker
Price Index for All Urban Consumers (CPI-U) rose shortages.
6.4 percent in the 12 months ending January ’22. • Barring a “black swan” event, the U.S. and Houston
• Businesses are struggling with increased costs. economies will continue to grow this year.
The Producer Price Index (PPI) rose 6.0 percent in
the 12 months ending January ’23.
• And many business leaders have embraced
a gloomy outlook. Ninety-three percent of
respondents to The Conference Board’s Measure
of CEO Confidence survey are preparing for a U.S.
recession over the next 12-18 months.

With so many conflicting indicators, it’s no wonder
economists can’t agree on the direction of the economy.
The Conference Board forecasts U.S. gross domestic
product (GDP) to contract for three consecutive quarters
this year.
The National Association for Business Economics
(NABE) has GDP flat in Q1, an almost imperceptible dip
in Q2, and growth again in Q3.

NBIZ ■ April 2023 9