There is a low probability of a recession this calendar year, however the risks are rising for a recession in the second half of 2023. Let’s take consumer confidence as an example. We hit COVID-19 recession and then rebounded quite swiftly. However, due to some of the turmoil and inflationary pressures we’re dealing with, all of a sudden, confidence started to come down. But the level is just as important as the trend. Today, at 107.2 we’re still at a very elevated level which supports an economic expansion.
If you look back at 2008, you know that confidence is at a historic low, employment rate is nearly 10% and job security was a major concern. Fast forward today and it’s a very different story. Sentiment, which is driven by personal finances, is at a historic low, so inflation is the primary culprit. Confidence is still pretty high and can be tied back to what’s happening in the labor market.
Right now, the unemployment rate is where it was before the pandemic. So, is there turmoil in consumer confidence? It depends. Yes, inflation is high, but we think a job market like this can be supporting of the overall economy. The same goes for consumer finance being in good shape which could be driven by what is going on in the housing market right now.