BETHLEHEM, Pa. - There is a two-in-three chance the nation's economy during 2023 will fall into recession.

That was the assessment of economist Jay Bryson during the Greater Lehigh Valley Chamber of Commerce's annual Economic Outlook luncheon Tuesday at SteelStacks in Bethlehem.

Bryson, managing director and chief economist with Wells Fargo, said the Federal Reserve's laser focus on reducing inflation by increasing the prime lending rate would likely spur a recession, although there was still a respectable chance it could be done without creating one.

However, he predicted the recession's depth would be "one of the milder downturns" since World War II, akin to the early recession of the 1990s. If so, the labor market will not "fall completely apart."

An economy growing at a paltry 1 percent during half of 2023 is likely, Bryson said.

The current rate of inflation is resting between 6 and 7 percent nationally - an improvement from 9 percent last June - but still "way too high," according to Bryson. Ideally the Fed would like to reduce inflation to about 2 percent and has only so many "instruments" at their disposal to do it.

1/24/2023 | The Chamber and Wells Fargo present The Lehigh Valley Economic Outlook & Community Development Awards.

"More Fed tightening of interest rates likely lies ahead," Bryson said. The economist added the Fed "learned a lesson" from the 1970s when interest rates shot upward, hitting double digits in 1980.

Overall, however, Bryson told the Chamber crowd of more than 600 that the economy's foundation is strong.

"The underlying fundamentals of the economy are generally pretty good," he said.

Job growth "is still strong," while the unemployment rate hovers around 3.5 percent. That low unemployment rate though causes wage pressures on employers and Bryson predicted an unemployment rate increase to 5 percent during '23 was a possibility.

"So at this point, I wouldn't say we are in a recession but as economic activity slows we would expect the unemployment rate to come up," Bryson said.

In the Lehigh Valley alone, there are well over 300,000 jobs available.

There were some moderate disturbing trends from 2022, though. One is that household "savings rates are at an all-time low." Second is that "credit card debt is rising sharply." Third is that consumers' "purchasing powers are being eroded."

The culprit, again, is mostly inflation.

"Rising inflation is eroding real disposable income," Bryson said.

"I feel realistic about the year to come. I certainly don't feel bad about it and we've had a tremendous amount of growth and COVID turned everything upside down," President and CEO of the Chamber Tony Iannelli said. "I think we'll come out again much slower than we would hope, but in the end I hope, I think we'll be OK." 

In other luncheon activities, the Chamber's 2023 Community Partners Award was presented by Allentown Mayor Matthew Tuerk to Santo Napoli, chair of the Downtown Allentown Business Alliance and owner of assembly88. Other people that made speeches included U.S. Rep. Susan Wild (D-7th); Nancy Dischinat, executive director of the Workforce Board Lehigh Valley; Barry Fisher, president of WFMZ-TV; Andrew Desiderio, principal of CliftonLarsenAllen and a Business Matters feature on "Healthcare and the Economy" featuring John Pierro, executive vice president and COO of the Lehigh Valley Health Network, and Iannelli.

You will be able to watch a live sit-down interview with John Pierro, Executive Vice President of Lehigh Valley Health Network, from the event on Business Matters on WFMZ-TV. 

Scroll down for comments if available

Recommended for you