It’s not quite the recession other experts are predicting.
Many financial experts are predicting that the U.S. economy is heading for a downturn. But at least one prominent organization thinks that it’s not a recession we have in store, but a “slowcession.” Here’s what that means — and what other economists are saying about what lies ahead in 2023.
What is a slowcession?
Mark Zandi, chief economist of the credit rating agency Moody’s, coined the term in a recent report about the year ahead. But what he’s describing isn’t a new concept. It’s simply that Zandi expects gross domestic product to grow painfully slow over the next year and possibly grind to a halt — but not contract. (A recession can broadly be defined as when the economy stops growing and starts shrinking. But it’s up to the National Bureau of Economic Research, which looks at other factors like employment and retail sales, to designate when a recession has set in.) Moody’s forecasts the GDP to grow by about 1 percent or less on a year-over-year basis through all four quarters this year. It doesn’t predict growth to reach 2 percent until the third quarter of 2024.
Why? In part, because the Federal Reserve’s aggressive interest-rate hikes seem to be doing its job of reining in inflation. And also because there don’t seem to be any of the warning signs that have typically preceded a downturn — like “overleveraged households and businesses” and an “undercapitalized financial system that has extended too much,” Zandi writes. Plus, Americans still have a healthy amount of savings, meaning they shouldn’t have trouble paying down their debt and consumer spending shouldn’t dip too much.
To be clear, Zandi — like virtually every other economist — does believe the economy will “struggle” in 2023, but he also thinks it’s “important not to convince ourselves that a recession is inevitable.”
What are other economists saying about the likelihood of a recession?
Zandi is among the minority; many of his peers appear far more pessimistic. JPMorgan Chase CEO Jamie Dimon said this summer that he initially suspected a bumpy 2023 but is now preparing for an economic “hurricane.”
“That hurricane is right out there, down the road, coming our way,” Dimon said. “You’d better brace yourself.”
In an October Wall Street Journal survey of economists, 63 percent said they think the economy will shrink in 2023. On average, they predicted the GDP would contract at a 0.2 percent annual rate in the first quarter and 0.1 percent in the second. More than two-thirds of the 23 biggest banks are also anticipating a recession, per the WSJ. And the five banks who aren’t, are aligned with Zandi — that any growth will be sluggish. They project growth at a rate of 0.5 percent on average (compared to the average pace of 2.1 percent we saw from 2012 to 2021, the Journal reports.) Whether it’s a hurricane ahead, or just rain, here’s how you can prepare your finances for 2023.
