If economic indicators [remain fairly] strong, why is the conventional wisdom that a recession is likely next year?
It all comes down to inflation and the Federal Reserve’s response to it. The Fed seems like it’s willing to at least countenance a substantial reversal in the labor market — more layoffs, higher unemployment — if not outright trying to cause one. That’s because the Fed’s overwhelming goal is to lower inflation, and its go-to tool to do that is slowing down the labor market by raising interest rates....
While aspects of the inflation picture are starting to slow and reverse — and many analysts expect house prices to decrease — the Fed has fixated on the rising costs of services that aren’t housing.... With overall wages still rising by about 5 percent on an annual basis, the Fed sees little chance of inflation falling without continued action....
According to economic projections released...by the Fed, interest rate hikes will likely continue early into [2023] and [the] unemployment rate could rise almost a point to 4.6 percent.
– Matthew Zeitlin, The Grid, 12/15/22. Read more at bit.ly/3v1PMUI.
