From a small northwestern observatory…

Every quarter, the Philadelphia FED surveys a team of professional economists on the “headline” topics of the day — GDP Growth, Unemployment, and Core CPI change topping the list. Naturally, 2022 has brought some very real updates to every model out there.

For the 4th quarter 2022, which we’re now in, the consensus agreement is that REAL GDP should grow at about 1.0 percent on an annualized basis, which is not much but certainly not “recession”. The consensus opinion is that REAL GDP will be nearly flat in the first half of 2023, then rising slowly to an annualized rate of 2.1% by the end of next year. For the uninitiated, something between 2% and 4% is usually considered to be a healthy, stable rate for a mature economy. Emerging economies, like China, need growth rates double that or more. Two quarters of negative GDP growth signals a recession.

Unemployment is currently hovering around 3.7%, and the consensus opinion among professional economists is that unemployment will stay relatively stable for most of the coming year, inching up to about 4.4% by the end of next year. For context, back when I was a boy, we were taught that frictional unemployment (that is, people between jobs, job seekers, etc.) was somewhere between 3% and 6%. Unemployment under 3% was usually a signal of impending inflation, and above 6% was a sign of economic weakness. However, those rates may be completely disconnected from reality in current times.

Core CPI (this is better known as the “inflation rate”) should be growing by an annual rate of 5.7% at the end of this year, but you probably already knew that. Economists think this will slowly decline, back to a reasonably healthy 2.9% by the end of next year.

If and as these change, I’ll keep you posted. Otherwise, if I can answer any questions about this, please don’t hesitate to reach out.

John A. Kilpatrick, Ph.D. — john@greenfieldadvisors.com