As Federal Reserve officials are expected to meet this week to discuss interest rates, many people are wondering if we could be headed for a recession.
Gus Faucher, PNC Financial Services Group Chief Economist, told KNX In-Depth ’s Charles Feldman and Chris Sedens that a “mild” recession could be on the horizon.
“I do think the most likely outcome is given what we've seen from the Fed so far…in the near future that we will get a mild recession,” he said. “Certainly, much milder than what we experienced with the COVID pandemic or back in the great recession in 2007, 2008.”
Despite his prediction, Faucher said he doesn’t see the recession happening any time soon.
“The job market remains good. Consumers continue to expand,” he said. “But. I do expect that the Federal Reserve will raise interest rates by another quarter of a percentage point when they meet next week. Those higher rates, they've gone up dramatically over the past year or two [and] really are starting to weigh on the economy…So, I expect that we will get a mild recession by late 2023 or early 2024.”
When it comes to layoffs, Faucher said that while it is possible, businesses will be cautious.
“I think businesses have been through a period of the past few years where they've had difficulty in finding work workers and so I think they're gonna be concerned about laying people off and then not being able to rehire again once the economy picks up,” he said. “Although we will see job losses, we will see a slightly higher unemployment rate. If we do get a recession, I think compared to past recessions, the downturn in the labor market is gonna be pretty mild.”
He added that he believes there’s about a 60% chance of a recession and a 4 % chance that the Federal Reserve will have a “soft landing” - which is when the interest rate is raised without causing a recession.
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