The weakness of retail sales and manufacturing output over the final two months of 2022 has reignited market fears of a hard landing this week, with the Fed’s latest Beige Book acknowledging that activity appears to have ground to a halt. Admittedly, the labour market still appears to be in good health – with jobless claims falling back below 200,000 last week. But we suspect that low claims figure is more a reflection of labour hoarding, with firms adjusting to weaker demand by aggressively slashing the weekly hours that employees work instead. The outcome will be the same – downward pressure on income growth and, with the saving rate already unusually low, consumption too. We continue to expect the economy to fall into a mild recession in the first half of this year.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services