Mid-Year Economic Outlook White Paper

As we move through the summer of 2022, many businesses are concerned about the economy's future path. In a mid-year U.S. Economic Outlook White Paper, Dr. Kenneth A. Kriz, Distinguished Professor of Public Administration and Director of the Institute of Public Finance at the University of Illinois, leans on three forecast models and three economic measures: GDP, the unemployment rate and Core Personal Consumption Expenditures (PCE) Deflator, to weigh the potential for a recession.

Highlights:

• Forecasts suggest a somewhat stagnant economy in the short term. Most forecasters see economic growth in 2022 averaging 2.5% to 3.0%. However, the New York Federal Reserve Bank model predicts lower growth and a recession this year.
• The labor market is nearly fully recovered from the pandemic. The national unemployment rate was 3.6% in May 2022 and is predicted to stay relatively the same through the end of the year, then rise slightly in 2023.
• As measured by the Core PCE Deflator, inflation was just under 6.3% in April. Businesses and households fear a substantial future interest rate increase by the Federal Reserve to stamp out inflation, which could lead to a downturn in the economy.
• Longer-term growth will be restrained by an aging population and immigration at levels less than necessary to replace retiring workers.