Enjoy the Ride NO CONSENSUS ON RECESSION “Rollercoaster” has been a common word used to describe the U.S. economy over the past few years. The steep drops and breathtaking rises as the country faced the challenges presented by the pandemic had economists predicting a variety of outcomes—with every one of them admitting that there were always unknowns that could affect the economy. Today, inflation is at a level that has not been seen since the late 1980s, but current consumer spending suggests that people are still willing to splurge on some items.1 “Overall, I’m positive about the economy in the latter half of 2023 and into 2024,” said Curt Long, vice president of research and chief economist for NAFCU. “We’ve encountered some headwinds as the Federal Reserve Board (Fed) has increased interest rates, which impacted the housing and banking industries, but we saw consumers power through and continue purchasing homes and automobiles.” While there are positives in all sectors, there are potentially signs that consumers may be moderating some behaviors, said Long. Retailers are seeing lower provide policymakers a tool to use in case of a downturn in the economy and potential recession, said Long. “If both inflation and growth decline, the Fed can choose to cut rates.” Elliot F. Eisenberg, Ph.D., president and chief economist at GraphsandLaughs, has a different opinion about the economy. “I have a strong feeling that we will see a recession,” said Eisenberg. “With some banks struggling, credit more difficult to obtain for some consumers and interest rates that may go higher, there is too much stress not to have a recession.” It is important to note that no one should panic about a recession this year, said Eisenberg. “Recession is part of the process, and the U.S. economy is in recession about 15% of the time,” he said. Since 1950, there have been 10 to 15 recessions, but the recessions most people remember were the 1974–75 recession triggered by the Arab oil embargo, the early 1980s recession that was triggered by a tight monetary policy implemented to reduce inflation and the 2008–09 recession related to the housing bust. “Fortunately, this will not be one of the recessions that will be remembered years from now,” he said. profits, and McDonald’s has reported signs of a slowdown in sales, which suggests that consumers are becoming more cautious, he said. “Retail and restaurant sales can serve as a bellwether for other sectors of the economy.” Long believes that a recession is unlikely with unemployment remaining at around 3.5%. “If unemployment were to rise, we would see significant problems and consumers would have to reduce their spending,” he said. “Of course, there are a lot of risks, such as the federal debt ceiling or banking concerns, that could create problems that are difficult to anticipate.” While the interest rate increases by the Fed have increased borrowing costs for consumers, the increased rates also Credit unions will see challenges and opportunities in 2023 By Sheryl S. Jackson 17 THE NAFCU JOURNAL July–August 2023
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