Every January, economists, business analysts, pundits and fortune tellers collect, analyze and interpret financial data, business trends and tarot cards, counting on faulty memories to have forgotten their errant forecasts of the year before, as they predict how the economy will fare in the coming year.
Dutifully, we’ve a collected samples of forecasts for 2022, all reflecting the challenge of predicting economic trends and the greater challenge of predicting how the ongoing pandemic is going to affect them.
ECONOMIC GROWTH
Jan Hatzius, Goldman Sachs: "The emergence of the Omicron variant increases the risks and uncertainty around the U.S. economic outlook….While many questions remain unanswered, we now think a moderate downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely." The firm predicts a growth rate of 3.8 percent – scaled back from earlier
Michelle Meyer, Bank of America: "While 2021 was a story of excess demand and a dearth of supply, we think 2022 will be one of rebalancing, albeit only gradually.” Sluggish employment growth, inflation fears and “supply-side constraints” will slow the growth rate, Meyer predicts, but leave it still more than double the 2021 pace, with growth stronger in the first half of the year.
Kevin Kliesen, Federal Reserve Bank of St. Louis: “Supported by the expectation of continued healthy financial market conditions, increased production to restock lean inventories, further gains in the consumption of services as consumer and business travel picks up, and a resilient housing market, continued above-trend growth is likely in 2022.” Kliesen sees real GDP growth of 3 percent to 4 percent as “the most probable outcome.”
Shane Grant, CEO, Danone North America: “As we go into 2022, I think it’s this theme of just volatility, and it’s not one particular type of volatility. It’s enormous volatility in our supply chain. It’s everything from input availability, capacity, transportation, labor, it’s Covid adaptations by ways of working adaptation. It’s this accordion economy of sort of stop-and-go and the adaptations required.”
Suzy Welch, CNBC Contributor: “[We expected 2021] to give us back our visibility into the future, give us back some kind of feeling that the earth was not moving under our feet at every moment. And of course, it just didn’t happen. ... You sort of get to a place where you think, ‘What can I know anymore?’”
EMPLOYMENT
Nick Bunker, director of economic research, Indeed Hiring Lab: “We’re all sort of at the whims of these [COVID] variants and surges in cases, and it’s hard to know when they might strike. Any sort of projections or outlook on the pace of [hiring] gains over the next year or so is still dependent on the virus.”
David Wagner, analyst at Aptus Capital: Labor force participation will continue to be a major concern. More than one million workers have retired over the past year “and “we’re just not going to replace those people,” Young said. “That’s something that we’ll just need to expect. Longer term, I think we’re going to continue to see labor shortages ... but in the next year or so it’s going to get better.”
Shane Grant, CEO, Danone North America: “The war on talent in 2022 is going to only intensify….It’s about game-changing people policies, like gender neutral parental leave, for not only corporate workers, but frontline workers. It’s about institutionalized flexibility. It’s about true commitment to diversity actions. And I think those things are going to become true differentiators in this war for talent in 2022.” he said.
INTEREST RATES
Bank of America: Omicron’s slowing will ease inflationary pressures, “but not quickly enough” to forestall Fed tightening. “[We] expect three rate hikes starting in June and continuing on a quarterly cadence.”
Wells Fargo: "With inflation likely to remain hot and the labor market firmly on the path toward recovery, we now project an earlier lift off for the federal funds rate….We look for the FOMC to raise the target range for the federal funds rate by 25 bps in Q3-2022 and another 25 bps in Q4-2022. We expect two additional rate hikes of similar magnitude over the course of 2023."
HOUSING MARKET
Todd Teta, Chief Product Officer with ATTOM. “The portion of wages required for major ownership expenses nationwide is getting closer to levels where banks become less likely to offer home loans. Amid very uncertain times, with the pandemic again threatening the economy, we will keep watching this key measure of housing market stability.”
Skylar Olsen, principal economist at Tomo (a home-buying app.): “None of us can promise that [finding] housing will be easy but it feels reasonable to promise that it will be easier than this past year.” Higher rates will both help and hurt the housing market, he predicts. “When you have higher interest rates, it becomes more of the people who buy homes just to live in them. That’s something the market will benefit from, coming back down to
Mortgage Bankers Association: “We see 2022 as a transition year, moving from a refinance market to a purchase market. Industry veterans know that past similar transitions have posed challenges as the industry works to match origination capacity to the new level of demand. A silver lining is that we are expecting both 2022 and 2023 to be record years for purchase originations.” The MBA predicts that the median price of existing homes will decline by 2.5 percent by year-end, as higher interest rates dent affordability and home sales.
Lawrence Yun, chief economist, National Association of Realtors: Respondents to an NAR survey expect “the housing market and broader economy normalize next year….They predict the inflation rate will decelerate after hefty gains in 2021, while home price increases are also expected to ease with an annual appreciation of less than 6 percent.”
Redfin: “Mortgage rates will rise to 3.6%, bringing price growth down to earth; New listings will hit a 10-year high, which will hardly make a dent in the ongoing supply shortage; Homebuyers will relocate to affordable cities like Columbus, OH, Indianapolis and Harrisburg, PA over the Sun Belt; Condo demand will take off….More and more homebuyers are open to buying a condo or townhome for a fraction of the price of a single-family home. That’s a reversal from when the pandemic lockdowns motivated homebuyers to seek out larger homes with big backyards
Zillow: “The housing shortage will be a defining feature of the market once again next year. The…market may not reach the incredible heights of 2021, but we expect it will be anything but slow next year. Expect the strong seller’s market to persist, the Sun Belt to maintain its top spot as the most in-demand region, and flexible work options to continue to shape housing decisions in new ways in 2022…. “Much of what drove high price growth this year will follow us into next year,” Zillow predicts, with prices rising “at extremely high levels” early in the year, before “taper[ng] off toward more normal levels,” resulting in an annual increase of about 11 percent ─ “not as much growth as in 2021, but still substantial.”
