(ABM FN-Dow Jones) The US will enter a recession for the next 12 months as the Federal Reserve attempts to raise interest rates significantly to bring down persistent inflation. This was revealed this weekend in a new poll of economists by the Wall Street Journal.
Respondents now estimate the probability of a recession in the next 12 months at 63 percent. That was 49 percent in July. This is the first time since July 2020 that economists who completed the survey have estimated the probability of a recession at more than 50%.
Expectations of a recession are rising as respondents believe that the Fed’s rate hike will not be without economic consequences. Nearly 59 percent now believe the Fed will raise interest rates too much and cause needless economic weakness. That was about 46 percent in July.
And according to the Wall Street Journal, the outlook for 2023 is also bleaker. Economists are counting on a contraction in US gross domestic product in the first two quarters of next year, as growth was expected in July.
Economists polled expect the US economy to contract by 0.2% in the first quarter of 2023 and by 0.1% in the second quarter. Three months ago, growth of 0.8 percent in the first three months of next year and 1.0 percent in the following quarter was forecast.
Workers are expected to cut their jobs in the second and third quarters of next year in response to economic developments and weak corporate earnings, economists believe, forecasting 34,000 and 38,000 job losses per month, respectively, in these two quarters. Previously, job growth was expected at 65,000 per month for that period.
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