Will Low Unemployment Figures Prevent A Recession in 2023?
According to Treasury Secretary Janet Yellen, "You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in 50 years." With the unemployment rate at 3.4% (the lowest since 1969), is Ms. Yellen correct?
CEO's think otherwise.
Over 140 CEO's were polled in the recent Q1 CEO Confidence Survey, and these notable stats prevailed:
- 93% of CEO's are currently preparing for a recession in 2023
- Most believe the recession will be brief
- 55% of CEO's consider a global recession to be the biggest challenge for their companies
- Only 37% of CEO's forecast an expansion in their workforce over the next 12 months (this number was 44% in Q4)
- 50% are amidst and/or forecast hiring freezes
What is the correlation between Unemployment & Recessions?
Sometimes seeing is believing. In the chart below, recessions occur after unemployment numbers reach their low point time and time again. If history is any indication of what to expect, Ms. Yellen will soon have a different message to convey. Notice the dark vertical areas indicating recessions, and the low point of the white lines (indicating unemployment) which typically precede recessions.
What is likely to happen to Mortgage Rates if a Recession occurs?
History has a tendency to repeat itself, and if the past several recessions are any indicator, mortgage rates will drop in 2023. Mortgage pricing, popularity of buydown strategies and other logistics all indicate a near-universal industry forecast that mortgage rates will drop in 2023. Note that mortgage rates not only drop "during" recessions, but also "immediately following" recessions.
How much will mortgage rates drop? How soon will mortgage rates drop? One thing we've learned over the years is that there is no true way to predict the exact outcome of mortgage rates, but the above charts seem to indicate better rates between now and the end of 2023.
Credit (and thanks) to MBS Highway for the above charts & statistics
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