The Growing and Slowing Economy | UCNA News

The economy is growing but slowing in 2022, according to Elliot Eisenberg, economist and president of GraphsandLaughs, LLC.

In a webcast from Origence, a CUNA First Level Associate Business Member, he revealed six key points for the economy:

1. 2022 will be a solid year

The economy is expected to continue growing for the time being but slow through 2025.

“2022 is going to be a good year. It won’t be a great year, but we’ll have 2.5% or 2.6% GDP growth and the recession won’t hit until 2023, if it hits,” Eisenberg says.

Strong gross domestic product (GDP) growth during the fourth quarter of 2021 offset a sluggish first quarter in 2021, with growth averaging 2.75%, he says. This level will not be sustainable.

Among the factors impacting the 2022 economy:

  • Low number of daily coronavirus deaths in the United States
  • Higher personal consumption expenditure despite supply chain challenges. These struggles, however, will not subside anytime soon.
  • Soaring oil prices, suggesting both growth in global economic activity and supply constraints.
  • Strong business profits.
  • A flattening yield curve.
  • Normalize household savings rates as enhanced unemployment insurance benefits end and fiscal stimulus fades.
  • Continued high used car prices and limited inventory of new cars.

Low inventory of existing homes with prices still high. The national housing payment-to-income ratio was 31.2% in April 2022, the highest level since the day before the housing market crashed in 2008.

2. The Federal Reserve will continue to raise rates

“The Fed will continue to raise rates, non-stop, every six weeks until inflation cracks and starts to come down,” Eisenberg said. “Even with this lousy first quarter, we’re still growing too fast, and that’s why the Fed needs to raise rates.”

The federal funds rate rose from 0.33% at the end of April to 0.83% in May. Eisenberg expects it to reach 2.375% by the end of the year.

“I get nervous in 2023,” he says. “Rate hikes through 2022 could come quickly, but they’re tolerable. If they hit 3% or 3.25%, that’s when I start to say, ‘Wow, I’m nervous.'”

3. The United States is expected to create 3.5 million jobs

The labor market is deeply tight, with low unemployment and an improving labor force participation rate.

“By July of this year, maybe even June, we will have gotten back all the jobs we lost,” says Eisenberg.

4. Inflation should peak soon

“Inflation will peak this quarter,” Eisenberg said. “The question is: how fast is it going down? If it takes its time, the Fed needs to raise rates further and the risks of recession are higher. »

5. Spending on services will increase

Retail spending is slowly returning to normal and service spending will increase as demand for goods declines.

“So the demand for goods will slowly dissipate,” says Eisenberg. “That should help reduce inflationary pressures to some extent.”

6. Inflation, unemployment and inventories

These factors are crucial in determining where the economy will go.

“We want to see inflation come down as quickly as possible,” Eisenberg said.

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