RALEIGH – There’s a recession coming in 2023, according to Sarah House, a senior economist and managing director at Wells Fargo, who shared an economic forecast for 2023 at an event hosted by the Raleigh Chamber on Wednesday afternoon.
“Another roller-coaster year in the economy,” described House, in her remarks. “There’s still a lot of uncertainty.”
Earlier on Wednesday, across Wake County, Dr. Michael Walden predicted that there could be 50,000 people in North Carolina who would lose their jobs when the recession hits.
That’s with a mild recession, Walden noted. And House agreed with the characterization of a coming recession in 2023 as a mild one, by historic standards.
“The U.S. economy is headed for, probably, a mild recession, by the end of this year,” said House. But that recession won’t have an even impact across sectors, geography, or the economy, she noted.
For instance, the Triangle is well-positioned to “sidestep” any mild recession, said House.
Still, recession may impact those who live in the region
But other sectors of the economy will take a hit, predicted House.
Consider what’s happening, and why, she explained.
The Federal Reserve has signaled that it could continue to increase interest rates in 2023, and could keep them high for a long time, as they look to combat rising prices.
Still, said House, there are already some signs that the Fed’s decisions are slowing down the economy.
Consider the housing market.
Even though it’s clear that in Raleigh, in the Triangle, and in North Carolina, more housing units are needed, price inflation in the housing market has slowed in recent months.
That’s coming as mortgage interest rates have risen compared to a year ago, noted House. For example, House said that a home that cost $400,000 would now be more than 40% more expensive if a consumer was to purchase that house with a mortgage this year compared to last year.
“Just the mortgage portion alone would cause that mortgage payment, the monthly payment, rise by more than 40%,” said House, adding that it’s no surprise why we are observing a slowdown in the number of home sales.
“With that affordability of housing being hit so hard,” said House, building is also slowing down. Still, though, rents are up about 30% since 2019, and “affordability has been a challenge in the multifamily sector, too,” said House.
“We need more houses,” said Ted Abernathy, the managing partner of Economic Leadership, LLC, who also spoke at the Launch 2023 event where he provided an overview of the regional and statewide economy.
“Housing cost is going to be our big challenge,” said Abernathy. “Every place in the Triangle has had housing prices, housing values, rising dramatically,”
What’s going on with the labor market
“We’re beginning to see some balance return to the labor market,” said House. “We think the Raleigh region can sidestep that recession,” she said.
Still, though, House noted that many consumers are spending down their savings, and they’re putting more on credit cards.
But bank accounts aren’t entirely depleted, noted House. “We don’t think a recession is immediately on the doorstep of the economy,” she said. “But as consumers continue to run down these savings … eventually we will see a retrenchment in spending.”
And House and her colleagues at Wells Fargo are predicting a recession. And that could mean that some in the Triangle will begin to feel squeezed – or even more squeezed than they did in 2022.
“When we think about the different sectors of the economy, housing is already in a recession, but as consumers continue to get squeezed,” said House. “We’re going to see income continue to get squeezed.”
Editor’s Note: WRAL is a sponsor of the Launch 2023 event and has been a sponsor for prior Launch events organized by the Raleigh Chamber. Watch today’s event live here on WRAL.com.