The Economy - A Look Ahead to 2023
As we begin 2023, you’re probably considering where the economy is headed and what issues you should be concerned with. We recently hosted an event featuring Robert J. Morgan, an economist CNB works with, who presented his take on our biggest economic issues right now and what we might expect moving into 2023. According to Morgan, the biggest issue currently is, not surprisingly, inflation. “Due to stimulus money, we had too much money pumped into the economy after the pandemic which increased demand, but not supply of goods. This shortage of goods, has caused prices to skyrocket and it’s hitting most households hardest in food and energy costs which are up 11.2% and 19.8% respectively year over year from 2021.” He also states that we aren’t seeing the true impact of more expensive housing costs yet as there’s a time lag in rental prices increasing and many existing homeowners refinanced into lower mortgage rates and haven’t been affected yet on that front. He expects those increases to be reflected in the Consumer Price Index by first quarter 2023 and predicts a recession in the first half of 2023.
According to Morgan, there are 2 issues our economy is dealing with, “One is cyclical – just an overheating growth we’re experiencing due to increased demand. The second issue is structural, which is a much longer-term problem.” While the Fed can continue to raise interest rates in order to dampen demand it’s really their only tool to affect the economy. What they can’t control, explains Morgan, is the labor market tightening, a decrease in population due to low birth rates in the US, environmental issues and the political instability we’re seeing not only in the US, but the world, that will eventually need to be addressed in order for our economy to grow. He does anticipate economic growth in the US by the fourth quarter of 2023 due to the labor market and the number of jobs that continue to be needed to be filled. “We just don’t have enough people to fill the open positions which supports higher wages and legal immigration policies that would allow for immigrants to fill some of those positions. The birth rate in the US is just not high enough to keep pace with employment,” states Morgan.
View Morgan’s complete economic forecast for 2023 on YouTube: https://youtu.be/OWwypPqIe5M