Comerica's latest forecast came as the Fed raised the target for its benchmark rate by 0.5% to a range of 4.25% to 4.5%.
, a senior economist, cited surging interest rates and high inflation as two of the “big headwinds” facing the U.S. economy in a report published this week. Other challenges include the end of fiscal stimulus provided by the federal government during the pandemic and weak export markets abroad.
“Either way, a recession looks to be a four in five proposition by the end of 2023,” the Comerica economists wrote. Within the labor market, the economists said they expect the unemployment rate will likely rise, albeit by less than in a typical recession, because workers who lose jobs will be able to find new ones “relatively quickly.”
Despite predicting a high likelihood of a recession, Adams and Bhahirethan offered a hopeful outlook for inflation. They said they expect inflation to be “less of a problem” next year, noting that supply chains have improved, business inventories are up, and pandemic-related shortages are largely resolved. Prices of fuels, metals, construction materials and durable goods are also flat to down over the last few months.
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