Economists expect a continuing recession in 2023, along with job losses, which will force the Federal Reserve to cut interest rates by late next year or in early 2024, according to a new Wall Street Journal survey.
A large majority (63%) expect the U.S. economy to remain in a recession, which is defined as two consecutive quarters of declining growth.
"'Soft landing' will likely remain a mythical outcome that never actually comes to pass," the University of Michigan's Daniil Manaenkov told the Journal, referring to the Federal Reserve's raising rates in hopes of keeping the economy from contracting.
The past Journal survey had economists expecting mild growth early in 2023, but expectations are turning down and increasingly negative, along with the markets under President Joe Biden.
Economists surveyed, on average, expect a 0.2% contraction in the first quarter of 2023 and a 0.1% contraction in the second quarter.
Also, job cuts are being projected around 34,000 a month in the second quarter and 38,000 in the third quarter. That comes after the last survey had projections of employers adding 65,000 jobs per month in each of those quarters, according to the Journal.
Some of the economic weakness, around 59% of economists say, will be caused by the continued hiking of interest rates, which are designed to cool massive inflation in the economy.
"The coming drag from higher rates and stronger dollar is enormous and will knock off about 2.5 percentage points from next year's GDP," according to Jefferies LLC's chief economist Aneta Markowska told the Journal. "In light of this, it's hard to imagine how the U.S. can avoid a recession."
Still, economists surveyed expect the recession to end fairly quickly (eight months) and the economy as well to grow 0.4% in 2023 and 1.8% in 2024, according to the Journal.
"The Federal Reserve is choosing between the lesser of two evils — take a recession with a rise in unemployment today or risk a more corrosive and entrenched inflation taking root," KPMG's Diane Swonk told the Journal. "The risks of a misstep are large, given the sins that low rates likely papered over."
Housing demand is expected to slow next year, too, as rates rise and home prices are projected to decline by around 2.2% in 2023, according to there U.S. Federal Housing Finance Agency — a first since 2011 of the Obama administration.
The Fed is expected to hike interest rates another three quarters of a percent in November and another two quarters of a point before the end of this year.
Just 30% say interest rates will start to be cut in late 2023, while another 28.3% see the next rate cut coming in 2024.
The Journal's survey of 66 economists was conducted Oct. 7-11.
© 2023 Newsmax. All rights reserved.