JPMorgan economists lowered their U.S. economic forecasts for 2022 and 2023. The decrease was prompted by higher mortgage rates, declining stock prices and a stronger dollar relative to trading partners.
In their report to clients, the economists downgraded their second half 2022 projections from 3 percent to 2.4 percent, and their first half 2023 projections from 2.1 percent to 1.5 percent. The second half of 2023 was lowered from 1.4 percent to 1 percent. According to the economists, this will result in a U.S. unemployment rate in the second half of 2023 of 3.5 percent, an increase from the previous 3.2 percent projection.
“The Fed is gaining traction in getting the desired tightening in financial conditions,” the economists wrote. “Financial conditions have tightened because, as Chair [Jerome] Powell said recently, the Fed has to slow growth. The Fed will do what it takes to make sure that happens. This gives us some confidence that GDP growth will slip below its potential rate in coming quarters.”
These drags on growth “should foster enough of a growth slowdown to eventually lead to a gradual upward drift in the unemployment rate later next year,” the economists wrote. They are forecasting a “soft landing” of slower growth with lower inflation, which is the aim of the Fed, though many experts have said that such optimal outcomes are uncommon.
JPMorgan is the latest to reduce its forecasts for the coming years. In April, Deutsche Bank economists forecast a deep US recession next year, while Goldman Sachs has estimated chances of a contraction at about 35% over the next two years.