Ingram’s February 2023

Is the long-predicted recession nearly here? Good luck reading the tea leaves. Where We Stand

by Dennis Boone

A year ago, the U.S. was showing signs of an economic pullback already in the making. And in fact, the first two quarters of 2022 yielded negative GDP. Back-to back negative quarters met the technical definition of a recession, but rates of -1.6 percent and -0.6 percent didn’t make for much of a recession. Economic forecasters might not have been surprised that the final two quarters of 2022 produced positive GDP, but they might have raised an eyebrow over the strength of the bounce: 3.2 and 2.9 percent. Hardly an indicator that difficult times loom. Some of that may be attributed to the Fed’s very public commitment to ratcheting up interest rates to strangle the inflation monster. Over the course of the year, it added 400 basis points to bring the federal funds rate to 4.5 percent (and another 25 bps since then, to 4.75).

The Fed’s Response The Federal Reserve’s Open Markets Committee board moved to address a spike in inflation in early 2022 with a quarter-point increase that doubled the Federal Funds Rate to 0.5 percent. In seven subsquent moves, the Fed has boosted that rate to 4.5 percent:

Rate Increase, Basis Points

Fed Meeting Date Jan 31 to Feb 1

Federal Funds Rate

25 50 75 75 75 75 50 25

4.75% 4.50% 4.00% 3.25% 2.50% 1.75% 1.00% 0.50%

14-Dec-22 2-Nov-22 21-Sep-22 27-Jul-22 16-Jun-22 5-May-22 17-Mar-22

While inflation remains a problem, unemployment is not. Despite a projected 500,000 monthly quits in the continuation of The Great Resignation, it’s still a job-seek- ers market, and record numbers of Americans remain employed. On a regional level, Creighton University economist Ernie Goss’ Rural Mainstreet Index recorded its third straight month of slow-growth metrics, 29 straight months of increasing farmland prices, and a 25th month—out of 27—with increased purchases of farm equipment. What appears to be happening is that service-sector employers hammered in the first pandemic year are finally drawing people back to work. Somewhat shakier are communications, publications, and certain mass manufacturing roles. Where do we stand? There are no clear answers to where we stand collectively as an economy. A clearer picture, perhaps, will emerge later in 2023 if the “always next year” threat of recession arrives this year.

Real GDP: Percent Change From Preceding Quarter

2021

2022

U.S. Bureau of Economic Analysis

Seasonally Adjusted Annual Rates

19

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Kansas City’s Business Media

February 2023