A chief economist who called the 2008 recession sees signs that the economy has already begun to unravel — and says a recession will be apparent as early as this summer
Although the US added slightly more jobs than economists had expected last month, nonfarm payroll reports will quickly become less impressive before dipping negative in just a few months' time, Shepherdson forecasted.
Shepherdson pointed to the National Federation of Independent Businesses Hiring Intentions survey as a leading indicator of where the job market is headed. He also said the turmoil in the banking system that is creating a pullback in lending could speed up these declines in job gains.Recessions, as defined by the National Bureau of Economic Research, feature a broad and significant downturn in the labor market and consumer spending.
The current unemployment rate of 3.5% still sits near a more than five-decade low. The Federal Reserve expects that number to rise to 4.5% by the end of 2023, meaning more than a million Americans would be put out of work. Under the surface of a healthy jobs report in March, layoffs are already starting to show up as a result of higher interest rates, Shepherdson said. The first quarter saw the largest number of layoffs in 14 years, he said, not including the start of the pandemic.
As a result of this softening in the labor market and declining wage growth, Shepherdson said the Fed should begin cutting interest rates.
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