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As we enter 2023, inflation is down, but that’s the end of the good news for the economy as the threat of a recession looms that could result in millions of job losses and budget cuts that will bring pain to many Americans.
During the videoconference “How tight will the economy be in 2023?” organized by Ethnic Media Servicesa panel of experts discussed how long this recession would last, which populations will suffer the most, and which areas of the economy would be affected the most.
Will we have a recession or not?
Dr. George Fenton, a policy analyst at the Center for Budget and Policy Priorities (CBPP), said we don’t really know if there will be a recession in 2023, and the consensus is that if we do have a recession, it will be short and shallow. But it could be short and deep; or long and shallow.
“We’re not really sure what’s going to happen, what matters is having a strong foundation of economic security with anti-poverty policies and programs.”
He said the forecasts are changing, and Mark Zandi, chief economist at Moody’s Analytics has said that we are facing a 50/50 chance of seeing or not a recession in 2023 while a survey of more than 40 economists from Bloomberg gave a higher forecast of 70-30.
Dr. Wendy Edelberg, director of the The Hamilton Project and principal member of Economic Studies of the Brookings Institution, as well as a former chief economist for the Congressional Budget Office, said one of the reasons the economy needs to slow down is partly because of all the fiscal support given; and because households and businesses are spending like there’s no pandemic.
“Labor force participation is still significantly down with one and a half to two million fewer workers than expected.”
So he said that broadly speaking, the economy has to slow down or something miraculous has to happen, which is unlikely.
He noted that for all of our concerns about where the economy might be headed, we have a very strong job market with 225,000 net new jobs created in December 2022.
But he said that somehow we’re going to have to get from point A, where we are now, to point B, where our economy is on a more stable and slower footing.
“Whether or not that means a year of modestly positive growth, or just a handful of quarters with slightly negative growth.”
He added that the slowdown in the economy will focus on the goods production sector, which has been very strong, out of the ordinary; and is finally beginning to return to earth.
“The goods sector will feel much weaker than the services sector. Even if we’re in a recession, I wouldn’t be surprised if we continue to see pretty good growth in that sector as people continue to return to face-to-face services.”
Dr Rakeen Mabud, chief economist and director general of policy and research at Groundwork Collaborative, He said we’re not out of the woods.
“The Federation has increased interest rates seven times in the last year. And there is a significant risk that the Federal Reserve will push our economy into an unnecessary recession, which would put millions of people out of work, slow wage growth, and cause immense financial economic pain.”
But he said we have to start from the principle that we can’t have a healthy economy unless the people who keep our economy going, workers, families, consumers are doing well.
“Fed Chairman (Jeremy) Powell really needs to recognize this and put people above his war on prices.”
And he acknowledged that he is concerned that these rate increases do not address the underlying causes of what is driving prices higher.
“The reason we have higher inflation today is not because people have too much money in their pockets or are overspending but because we have a system built by and for big corporations that has completely failed to meet the needs needs of the people in a moment of crisis”.
He said the Bureau of Labor Statistics report makes it very clear that we don’t really need mass unemployment to reduce inflation.
“Prices can go down without putting millions of people out of work or throwing them to the lions; in fact, we have other tools beyond the Federal Reserve, which are actually more appropriate given the inflation we are experiencing today.”
He concluded by saying that workers and families already struggling with high prices should not be asked to shoulder the added burden of high unemployment.
“It’s not effective and it goes against the shared goal of really building a resilient and sustainable economy that works for everyone.”