A recent poll of economists by the Wall Street Journal showed that 63% expected a recession next year. That number was up from 49% last month.
This is the first time that more than half of the economists responded by predicting a major downturn.
As companies contract, economists are expecting unemployment to rise. Most expect unemployment to increase substantially beginning in the 2nd Quarter of 2023.
Forecasters are expecting the Federal Reserve Bank to continue to raise their Fed Funds Rate past the point where the economy would have a soft landing. An over-increase in the rate would push our domestic economy into a recession.
If there is any good news, it’s that most economists are expecting the recession to be short-lived. Most are predicting a modest GDP growth rate of 1.8% in 2024.
Let me leave you with this.
I’m sure you’ve been watching the news about the most recent melt-down in the English markets. I’ve spoken to many who’ve had questions, so let me explain.
A new Prime Minister was elected who pushed through a package of tax decreases and price fixing laws that were aimed at capping the price of energy and radically reducing taxes. This package would have pushed the overall UK economy in a broadened recession by increasing its deficit to an alarming figure.
The markets responded in a huge sell-off, dropping the value of the English Pound to a 37-year-low. The sell-off further pushed up bond prices, given the inverted relationship of bond demand and pricing.
The finance minister has since been fired with the new one reversing most of the proposed policies. The markets have responded positively by returning to a place of relative stability.
A similar thing has happened in the US markets because investments are all about the future.
When in an inflationary market, government overspending does nothing but exacerbate the problem. If a government pushes too much money into an economy, it does nothing but increase buying which pushes up prices, creating inflation.
Also, when that future economic outlook is grim, companies have difficulties turning profits. As such, investors sell, pushing down the prices of equities and increasing the prices of debt instruments.
The only major difference is that it took a lot longer than a week for it to happen in America. And here we are.
The next year-and-a-half isn’t going to be easy.
Getting your company through a recession is all about adjustments. Some may be minor. Others not-so-much.
You need to think about your organization as a whole. That means that the needs of the many outweigh the needs of the few.
If you need to let some people go, sooner is better than later.
If you need to make changes to your offerings, get to it.
If you need to make changes to your physical plant, sooner is better than later.
And do so knowing that we are right there with you.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, M&A Due Diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
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