Economists Are Cutting Back Their Recession Expectations

Wall Street Journal (07/15/23) Torry, Harriet; DeBarros, Anthony

Economists are dialing back recession risk expectations due to easing inflation, a strong labor market, and economic resilience, according to a survey of 69 economists by the Wall Street Journal. Economists lowered the probability of a recession in the next 12 months to 54% from 61% in the prior two surveys. Forecasters said gross domestic product would increase 1% in 2023, measured from the fourth quarter a year earlier, double the previous forecast of 0.5%. Nearly 60% said slowing inflation is the main reason for optimism about the economic outlook.

Economists expect the U.S. Federal Reserve’s preferred inflation measure to decline to 3.7% by the fourth quarter of this year, though that is still well above the Fed’s 2% target. On average, economists still expect the labor market will lose 10,551 jobs a month in the first quarter of 2024, broadly unchanged from their previous forecast. But unlike in the April survey, economists no longer expect job cuts in the third and fourth quarter of this year. They expect employers to add jobs in the second and third quarters of next year, suggesting any downturn will be mild.

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