The majority of business economists believe the United States is already in the midst of a recession, despite the Biden administration insisting the economy is strong enough to avoid one, according to a new report.
It found that nearly two-thirds (or 64 percent) of respondents indicated that the United States is either already in a recession (11 percent) or has a “more-than-even likelihood” of entering a recession in the next 12 months (53 percent).
The report comes as inflation stood at 8.2 percent in September, while on a monthly basis the Consumer Price Index rose 0.4 percent. That is despite the Biden administration’s promise that bringing down inflation remains a top priority.
Federal Reserve officials have now indicated that more interest rate hikes are on the way, and could be even more substantial, possibly going well above 4 percent this year.
NABE’s report indicated a continued slowing of the U.S. economy as well as ongoing labor shortages and continued cost pressures for businesses.
The Net Rising Index (NRI) for sales—the percentage of respondents reporting rising sales minus the percentage reporting falling sales—fell to 8 in the previous quarter, its lowest level since the middle of 2020, according to the NABE survey.
Elsewhere, almost a quarter of the respondents (or 24 percent) reported a shortage of unskilled labor, while 63 percent said that wages rose at their firms over the past three months, up from 55 percent in the previous survey.
US Economy Has ‘Strength and Resilience’
Wage expectations for the next three months also dropped down from an NRI of 51 in July to 43 in October, matching its lowest reading since April 2021.Hiring plans also appear to be easing, with the share of respondents stating they anticipate headcounts to rise at their firms over the next three months down to 22 percent from 24 percent in July and 50 percent in January 2022.
Meanwhile, over half, or 52 percent, of respondents said that the prices their firms charge increased in Q3 2022, up 9 percentage points from July’s NABE survey, while 44 percent of respondents expect the prices their firms charge to increase, down 6 percentage points from July.
“Approximately one-third of respondents report rising sales at their firms during the third quarter of 2022, compared to nearly two-thirds at the end of last year,” said NABE Business Conditions Survey Chair Jan Hogrefe, chief economist at Boeing Commercial Airplanes. “Profit margins have contracted, on balance, with more respondents reporting falling rather than rising profit margins for the first time since mid-2020.”
Hogrefe noted that “cost challenges, in particular through the wage channel,” remain an issue, with the survey showing “the third-highest percentage of respondents reporting rising rather than falling wages in the survey’s history.”
“If we look at where the United States is, two things are clear. One is that we have a degree of strength and resilience in the labor market and household balance sheets and in business investment. That is continuing to move our economy forward, and that’s really important,” Deese said.
“The second is that we are in a stronger position than . . . frankly, any other country to navigate through this transition without having to give up those gains.”
