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Piper Sandler’s chief global economist Nancy Lazar explains why she predicts a recession in the second half of 2023.
According to a Wall Street economist, an impending recession this year will feel more like the 1970s than a 2008-07 depression.
“People are too focused on 2008 and 2020. This is more like 1973, 74 and 2021,” Piper Sandler chief global economist Nancy Lazar said in “Mornings with Maria“Monday.
Lazar predicted to feel the full impact of a recession in the second half of 2023 as the spillover effects of the Federal Reserve rate hikes take hold.
An inflation gauge closely watched by the Fed showed signs of slowing in December but still remained abnormally high, according to new data released Friday.
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The Personal Consumption Expenditures (PCE) index showed that consumer prices rose 0.1% from the previous month and increased 5% annually, according to the Bureau of Labor Statistics.
While the US economy may be on a “bumpy roller coaster,” Piper Sandler’s chief global economist Nancy Lazar says it’s headed for a recession “like 1973, ’74,” in “Mornings with Mary”. (iStock)
While the Fed is targeting the headline PCE figure in its attempt to push consumer prices back to 2%, President Jerome Powell previously told reporters that basic data is actually a better indicator of inflation. Both the core and headline numbers point to inflation well above the Fed’s preferred target of 2%, a worrying sign as the central bank is already raising interest rates at the fastest pace in decades.
Lazar argued that it takes about a year to changes in federal funds have a negative impact on the economy.
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“We believe that there will be further stagnation in the second quarter and then a total drop in the second half of the year,” explained the economist. “Because there was, first, a global tightening cycle in 2021, the lag effects of that hit the US economy with our multinational economy. Second, oil prices increased in 2021, and third, yields “Bonds went up significantly. So what slowed down last year was those three metrics. Going into this year, the lagged effects of that Fed tightening cycle are reflected in the money supply which is now declining.”
When it comes to the labor sector, Lazar pointed to “dark clouds” hanging over the unemployment figures.
“That increase in December was quite interesting in the context of employment, the unemployment rate is still at 3.5%. It tells us that the consumer sees some dark clouds on the horizon,” he said. “Potentially they realize they’ve cut their savings rate a lot, too far below 3%, and now maybe they’re a little more worried.”
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‘The Big Money Show’ co-hosts Taylor Riggs, Brian Brenberg and Jackie DeAngelis discuss how the pain of inflation affects Americans’ pocketbooks and lifestyles.
The market pundit also noted that Americans will see a “slow dance into a recession,” with the lagging effects showing up first in earnings. But for now, real purchasing power appears to be “recovering.”
“It’s a very bumpy roller coaster, but the roller coaster is headed down,” Lazar said. “But here in January, we think things could improve a bit. We don’t really see a recession until the second half of 2023. We think the first half is actually going to be a bit confusing.”
FOX Business’s Megan Henney contributed to this report.