by Calculated Risk on 1/12/2023 02:55:00 PM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2023. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts, and maybe some predictions for each question.

2) Employment: The economy added 4.5 million jobs in 2022.   This makes 2022 the second-best year for job growth in US history, only behind the 6.7 million jobs added in 2021.  How much will job growth slow in 2023?  Or will the economy lose jobs?

The FOMC doesn't project job growth, but they do project the unemployment rate. Currently the FOMC is forecasting the unemployment rate will increase to the 4.4% to 4.7% range in Q4 2023.  Depending on their outlook for population growth and the participation rate, it appears the FOMC is essentially forecasting between 1 million and 1 1/2 million job losses in 2023.  That is a significant employment recession.

Here is a look at the job changes during previous recessions.

Job Changes During Recessions
Year	Job Change	Recession
1974	-379	'73-'75
1975	365	'73-'75
1980	271	'80
1981	-48	'81-'82
1982	-2,124	'81-'82
1990	330	'90-'91
1991	-838	'90-91
2001	-1,727	'01
2002	-510	'01
2008	-3,553	'07-'09
2009	-5,051	'07-'09
2020	-9,292	'20

The 2020 recession was due to the pandemic.  The '07 to '09 recession was due to the financial crisis following the housing bubble, and the '01 recession was related to the bursting of the stock bubble.   Excluding the pandemic and bursting bubbles, only the '81-'82 recession had comparable job losses to the FOMC forecast, and that was a very deep recession.

Job losses in construction haven't started yet because a record number of housing units are under construction.   But those losses are already coming. 

My sense is the FOMC is overly pessimistic, and my guess is there will be something like 400 to 800 thousand jobs added in 2023.  It will depend on inflation and FOMC policy.    If the Fed drives the economy into recession (to cool inflation), then we could see job losses in 2023. 

Here are the Ten Economic Questions for 2023 and a few predictions:

• Question #1 for 2023: How much will the economy grow in 2023? Will there be a recession in 2023?
• Question #2 for 2023: How much will job growth slow in 2023? Or will the economy lose jobs?
• Question #3 for 2023: What will the unemployment rate be in December 2023?
• Question #4 for 2023: What will the participation rate be in December 2023?
• Question #5 for 2023: What will the YoY core inflation rate be in December 2023?
• Question #6 for 2023: What will the Fed Funds rate be in December 2023?
• Question #7 for 2023: How much will wages increase in 2023?
• Question #8 for 2023: How much will Residential investment change in 2023? How about housing starts and new home sales in 2023?
• Question #9 for 2023: What will happen with house prices in 2023?
• Question #10 for 2023: Will inventory increase further in 2023?