Most economists put odds of recession at 50% or less: NABE

Dive Brief:

Economic growth will slow to just 1% from the current quarter to the fourth quarter of next year, according to economists surveyed by the National Association for Business Economics, with three out of four respondents putting the odds of recession at 50% or less.
The labor market will further cool during the next 12 months and inflation will continue to ease toward the Federal Reserve’s 2% target, according to respondents in the NABE Outlook Survey. About one third of the panelists (32%) expect the central bank will begin cutting the federal funds rate during Q2 2024, while 29% predict it will begin reducing borrowing costs in Q3.
Excessive monetary tightening and the threat of widening conflict in Ukraine and the Middle East pose the biggest risks to economic growth, Morgan Stanley Chief U.S. Economist Ellen Zentner said in a statement, citing survey panelists. “While most respondents expect an uptick in the unemployment rate going forward, a majority anticipates that the rate will not exceed 5%,” according to Zenter, NABE president.

Dive Insight:

A report Tuesday that job vacancies fell in October to 8.7 million from 9.4 million the prior month bolstered optimism that the labor market will cool without pushing up unemployment much beyond the 3.9% level in October.

Decreased hiring combined with an unusually low level of layoffs reinforced forecasts that the Fed may achieve a so-called soft landing, curbing inflation and economic growth without causing a downturn and mass unemployment.

The ratio of job openings to unemployed workers fell to 1.3, the lowest level since the middle of 2021, according to the Bureau of Labor Statistics.

Also, the quits rate, or the number of workers who left their jobs as a percent of total employment, remained unchanged in October at 2.3% compared with 3% in April 2022.

A pullback in consumer outlays during the past several weeks supports expectations that the economy will slow from a red-hot annual pace of 5.2% during the third quarter. Consumer spending eased in October to the slowest pace since May.

Gross domestic product growth will probably fall during the current quarter to a 1.2% annual rate, the Atlanta Fed said in a forecast Friday.

The NABE survey results also align with expectations of a soft landing for the economy. Consumer spending and government spending will both probably grow next year by 1.5%, faster than the 1.3% pace predicted in the October survey.

Nearly eight out of 10 NABE survey respondents (79%) predict that unemployment will peak at no more than 4.9% during the next 12 months, with half expecting a high somewhere between 4% and 4.4%.

Employers will probably push up compensation next year 3.7% while the core personal consumption expenditures price index — the Fed’s preferred inflation measure — rises 2.3% from the current quarter to Q4 2024, the panelists said.