While the potential risks of a coming economic downturn are “very high,” factors such as the strong labor market and loosening pressure on supply chains could see the U.S. economy narrowly missing a recession, Julia Coronado, president and founder of economic research firm MacroPolicy Perspectives said during a panel discussion Tuesday.
“I have the U.S. economy skirting a recession — I don’t have recession as a baseline,” she said, speaking during a media event on the results of a survey on risks top of mind for business leaders conducted by global consulting firm Protiviti and NC State University.
Coronado, a former Federal Reserve economist who served an eight-year tenure at the Fed beginning in 1997, according to her LinkedIn, currently serves as the president of National Association of Business Economists (NABE).
A NABE survey of 51 professional forecasters released Monday found the odds of a U.S. recession exceed 50%, with a downturn most likely to begin in the first quarter of 2023. The recession is likely to be mild, according to the NABE survey, with the U.S. economy set to recover and expand 0.3% for the full year.
Economic uncertainty was the second-highest rated overall risk for 2023, the 11th annual Executive Perspectives on Top Risks for 2023 and 2032 found, with concerns regarding inflation and a recession abounding. The survey includes insights from 1,304 board members and executive leaders surrounding their top risk concerns — out of a list of 38 risks — both for the upcoming year as well as ten years in the future.
Fears surrounding central bank policies, persistent supply chain challenges and rising labor costs have dampened executive sentiments for the economy, according to the survey, alongside concerns over a potential recession which could occur early next year.
Relaxing supply chain pressures, a shift back to service-based spending by U.S. consumers, and a robust labor market — the unemployment rate is hovering around 3.7% — are all factors that could see the U.S. economy narrowly miss a recession, Coronado said.
“It’s really hard to tip the ocean liner of the U.S. economy over, so I think it’s going to be a tough year, a volatile year, but companies are hard at work trying to manage these risks, and we’re making progress, so I’m relatively optimistic compared to some of my peers,” she said.
Coronado also pointed to a Nov. 30 speech by Federal Reserve Chairman Jerome Powell, who indicated the Fed will likely slow the pace of tightening in coming months in a bid to hopefully achieve a soft landing. The Fed has hiked interest rates 3.75 percentage points thus far this year in a bid to clamp down on inflation.
Concerns over economic uncertainty stretches out beyond 2023 for executive leaders, however, according to the Protiviti survey. Economic conditions that could potentially restrict growth opportunities came in as the eighth-highest overall risk cited by board and executive leaders for 2032, according to the survey.
The risk that was top of mind both for 2023 and for executives’ 10-year outlook concerns talent retention, however, according to the study. The ability to attract and retain top talent was the top rated risk both for 2023 and 2032, according to the survey, as executive leaders struggle with the changing future of work, the role of emerging technologies such as automation and artificial intelligence (AI), and rising labor costs.