Top US bank issues grim prediction
OREANDA-NEWS The Federal Reserve’s aggressive efforts to bring down historically high inflation will cause the US economy to start losing tens of thousands of jobs a month beginning early next year, Bank of America (BofA) warned in a note to clients seen by CNN.
The pace of US job growth is expected to be roughly cut in half during the fourth quarter of this year, according to the media outlet, reporting on Monday. As pressure from the rate hikes mounts, nonfarm payrolls will begin shrinking in early 2023, translating to a loss of about 175,000 jobs a month during the first quarter, the bank said. Charts reportedly published by BofA suggest that the job losses will continue through much of 2023.
“The premise is a harder landing rather than a softer one,” the head of US economics at BofA, Michael Gapen, told CNN.
Analysts at the investment bank indicated that in a perfect world, the central bank would slow the job market enough to bring inflation back to healthy levels but not so much that it would cause significant and persistent job losses. However, BofA doesn’t think the Fed will be able to pull that off. “We are looking for a recession to begin in the first half of next year,” Gapen said.
On Friday, the Bureau of Labor Statistics reported that although the job market is slowing down, the country added a stronger than expected 263,000 jobs in September, while the unemployment rate actually dropped to 3.5%, matching its lowest level since 1969. But the Fed’s aggressive interest rates hikes to ease demand could change the course of things, BofA notes.
According to Gapen, the unemployment rate will climb to around 5% or 5.5% over the next year, against the Fed’s expectation of 4.4%.
The Fed has been raising interest rates at the fastest pace in at least four decades to cool spiraling inflation despite the risk that this will exacerbate recession risks.
Комментарии