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Local business leaders warned 2023 will likely bring a 'mild recession'

Jay Bryson forecast.jpg
Tom Shortell
/
LehighValleyNews.com
Jay Bryson, the chief economist for Wells Fargo's Corporate and Investment Bank, discusses how the economy is weathering high inflation Jan. 24, 2023. His remarks came during the Greater Lehigh Valley Chamber of Commerce's Economic Outlook 2023 event at SteelStacks.

BETHLEHEM, Pa. — A top economist at the country’s fourth-largest bank presented a mixed forecast to Lehigh Valley business leaders Tuesday as the United States tries to weather high inflation.

Jay Bryson, chief economist for Wells Fargo’s Corporate and Investment Bank, told a packed house at SteelStacks that the nation likely is headed toward mild recession at the end of this year.

Bryson was keynote speaker at the Greater Lehigh Valley Chamber of Commerce’s Economic Outlook 2023 event.

  • A chief economist with Wells Fargo told Lehigh Valley business leaders to expect a recession in 2023
  • Jay Bryson said it's unlikely the Federal Reserve Board sticks a soft landing as it battles high inflation
  • Other speakers at the Greater Lehigh Valley Chamber of Commerce event painted a rosier picture of the local economy

However, if a recession does emerge, it shouldn’t mirror the economic chaos of the early days of the pandemic or the Great Recession, Bryson said.

In his forecast, the economy would level out by 2024. It’s possible but unlikely the economy could avoid the downturn — a soft landing, as economists call it.

“This is a modest business cycle downturn. It’s not a financial collapse by any stretch of the imagination,” Bryson said of his prediction.

Since March 2022, the Federal Reserve Board has raised interest rates in an effort to cool off the market and lower soaring inflation. The rate hikes are starting to work, Bryson said — the latest data from the U.S. Labor Department pegged January inflation levels at 6.5%. That’s down from last year’s peak of 9% but still far higher than the target 2.5%.

“This is a modest business cycle downturn. It’s not a financial collapse by any stretch of the imagination"
Jay Bryson, chief economist for Wells Fargo’s Corporate and Investment Bank

“The good news is that we’re nearing the end of this," Bryson said. "The bad news is we have a little bit further to go."

Bryson anticipated that interest rates shouldn't climb much higher, but said he expects the Fed won’t lower them anytime soon.

He said he believes it’s taking a hard-earned lesson from the 1970s. Back then, he said, the Fed eased up on interest rate hikes when things first appeared to improve, allowing inflation to become entrenched into the 1980s.

An otherwise strong economy is helping to minimize the pain, he said.

The supply chain has largely recovered from the pandemic, Bryson said, and unemployment is currently at 3.5% nationally — a 60-year low. Wages grew more than 4.5% annually last year compared with 2021, he said.

Workforce Development Executive Director Nancy Dischinat
Tom Shortell
/
LehighValleyNews.com
Nancy Dischinat, executive director of Workforce Board Lehigh Valley, said the local unemployment rate is at a 20-year low during a Jan. 24, 2023 presentation at the Greater Lehigh Valley Chamber of Commerce event at SteelStacks in Bethlehem.

But even higher inflation is wiping out those gains, causing consumers to feel the pinch.

That’s causing households to make up the difference by saving less or racking up debt, he said. Americans' credit card debt is racing toward $1.2 trillion, which is a 23% increase since 2021.

"A picture is worth a thousand words," he said, sharing a graph showing runaway credit card debt. "These things aren't sustainable."

Bryson's remarks were a bleak contrast to most other speakers.

In a presentation from WFMZ-TV, Lehigh Valley Planning Commission Executive Director Becky Bradley said the region saw a record number of development proposals last year.

Nancy Dischinat, executive director of Workforce Board Lehigh Valley, said local unemployment levels are at a 20-year low. The number of people seeking jobs approximately matches the number of job openings in the area, she said.

“There is a job for every person in the Lehigh Valley who wants one," Dischinat said. "I am not kidding!”