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While 2022’s GDP growth forecast is set at 2.4% (Down from 2021’s actual growth of 5.7%, according to Advisor Channel.), 2023 will bear the weight of damage to purchasing power through price increases and increase in borrowing costs.
The GDP growth forecast for 2023 is set at 1.6%.
The risk of a recession is rising and is estimated to be within a 35%-45% band.
The band is wider now because it reflects uncertainty over the Russia-Ukraine armed conflict.
On the federal reserve front, the Fed is likely to push rates to 300 bp by year end, reaching 3.50%-3.75% by mid-2023.
Labor force participation has declined and is now at a 45-year low, especially for women.
The unemployment rate, 3.6% in May is expected to remain near that rate until early 2023.
After Fed rate hikes continue to take place next year, the unemployment rate should top 4.3% by the end of 2023 and 5% by the end of 2025.
Looking closer, a household survey put unemployment at a low rate but for the wrong reasons. 353,000 people got jobs and 363,000 left the labor force.
In the first two months of the pandemic in the U.S, the number of people (age 16 and above) decreased to a 49-year low by 3.9% or 8.2 million participants.
While the male portion of the missing workforce has mostly come back to work, more than 600,000 women are still missing from the labor market.
When we look at workers aged 25-44, 744,000 female workers are still missing. Men in this bracket have surpassed the pre-pandemic peak by 176,000.
On the household front, gas prices have put a dent in household purchasing power.
Poor people are more affected by this rise in prices.
Energy spending as a percentage of disposable income for low-income households is about 5 times more than that of high-income households.
The U.S housing industry had been hit by high prices and rising interest rates.
By June 3rd, the mortgage applications index fell to 208.20, the lowest it’s been since May 2020.
By June 17th, the index recovered to a level of 242.8.
Since the Fed is behind the curve on inflation, we can expect to see more aggressive rate hikes in the future.
(Note for the reader: This article has been sourced from S&P’s website.
Any and all information seen here is a rewritten and edited version of S&P’s article for the Utopian Global customer, which is you. The link to the article is listed below if you’re interested.)