Today’s Morning Jolt is about President Biden licking an ice cream cone and boasting “our economy is strong as hell,” as two new polls indicate that Americans think the economy is doing terribly. But forget the grim outlook about the economy right now; take a look at what economists are expecting for the U.S. economy in 2023:
On average, economists put the probability of a recession in the next 12 months at 63 percent, up from 49 percent in July’s survey. It is the first time the survey pegged the probability above 50 percent since July 2020, in the wake of the last short but sharp recession.
Their forecasts for 2023 are increasingly gloomy. Economists now expect gross domestic product to contract in the first two quarters of the year, a downgrade from the last quarterly survey, whereby they penciled in mild growth.
…forecasters expect the labor market to weaken in the months and years ahead. They predict the unemployment rate, which was 3.5 percent in September, will rise to 3.7 percent in December and 4.3 percent in June 2023. Economists’ average forecast for the jobless rate at the end of next year is 4.7 percent, and they expect it to stay broadly at that level through 2024.
We’ve had two consecutive quarters of GDP decline; the forecast for the current quarter is brighter — the Atlanta Fed is projecting 2.3 percent growth. But if those consensus forecasts are right, the U.S. will experience two quarters of shrinkage, then a quarter of growth, then another two quarters of shrinkage — a sequence that is likely to all blur together as one long stretch economic bad times.
The first year of the Biden presidency was a bumpy ride, with widespread supply chain issues and empty shelves, the emergence from the Covid-19 pandemic in fits and starts, the Omicron wave, etc. The second year of the Biden presidency represented U.S. households getting pummelled by inflation above 7.5 percent, month after month, along with record-high gas prices and a tumbling stock market. If the third year of Biden’s presidency offers a combination of increasing unemployment, high interest rates and mortgage rates, high energy prices, inflation being tough to bring down, and tumultuous markets, many Democrats will see no choice but to run someone else. And that’s even aside from questions about Biden’s age and mental and physical stamina as he turns 80.
If you’re Gavin Newsom or J. B. Pritzker or Phil Murphy, you have absolutely no reason to stop your not-so-subtle flirtation with running for the Democratic nomination in 2024. And if you’re Kamala Harris or Pete Buttigieg, you may want to stop by the Oval Office and ask the boss how he’s feeling. Because right now, the most likely scenario is yet another bad midterm election for the president’s party, and Biden limps through a rough year in 2023 – a formula for at least a primary challenge, if not Biden choosing not to pursue another term.