There has been a lot of talk about the recession in recent years. This may cause us to worry about a repeat of what we saw in 2008. Check out the latest expert predictions to find out why this isn’t happening.
The economy is very strong, according to Jacob Chanel, chief economist at LendingTree.
“At least right now, the fundamentals of the economy, despite some hiccups, are doing pretty good. While things are far from perfect, the economy is probably doing better than people want to give it credit for.”
This may be why a recent Wall Street Journal poll found that only 39% of economists believe there will be a recession next year. This is significantly lower than the 61% who predicted a recession a year ago (see chart below).
Most experts believe there will be no recession in the next 12 months. One reason is the current unemployment rate. Let’s compare where we are today with historical data from Macrotrends, the Bureau of Labor Statistics (BLS), and Trade Economics. When we do that, it’s clear that unemployment is still very low today (see chart below).
The orange bar shows that the average unemployment rate in 1948 was about 5.7%. The red bar shows that the unemployment rate rose to 8.3% right after the 2008 financial crisis when the housing market crashed. Both figures are significantly higher than January’s unemployment rate (shown in blue).
But will unemployment rise? Take a look at the diagram below to answer that. Using data from the same Wall Street Journal survey, we show how analysts expect the unemployment rate to look over the next three years, compared to the long-term average (see chart below).
As you can see, economists don’t expect the unemployment rate to come close to the long-term average over the next three years, let alone the 8.3% it was during the last market crash.
But if these predictions are correct, some people will lose their jobs next year. Whenever someone loses their job, it is a difficult situation not only for the individual but also for friends and loved ones.
But the bigger question is whether enough people will lose their jobs to create a wave of foreclosures that could crash the housing market. Looking ahead, unemployment could remain below the 75-year average. This means that we shouldn’t expect the wave of foreclosures to have a significant impact on the housing market.