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IFAI Expo keynote address

ATA News, News | October 12, 2022 | By:


At today’s keynote address, noted economist Dr. Elliot Eisenberg attempted to answer the question on everyone’s mind these days: “Are we in a recession??”

His answer? “We’re not in a recession yet…but we’re going to get there.”

The pandemic may be over, but the economy is sinking. Around 70% of U.S. GDP is household consumption and, as the last of the COVID stimulus money exits the system, spending is falling off a cliff.

“Spending went crazy during COVID and we pulled forward a lot of demand,” Eisenberg explains. “Now people don’t want to buy things, they are shifting to spending money on experiences. We are seeing them pivot from buying goods to buying services.”

That’s if they’re spending any money at all. Inflation has caused real capita disposable income to fall by $700 from pre-COVID levels. “Americans are charging things on their credit cards like there’s no tomorrow,” he notes.

But while the dollar may be weakening here in the U.S., other nations’ currencies are weakening more rapidly, causing a dramatic increase in demand for dollars as most international debts are denominated in dollars. This demand is pushing up the value of the dollar, and will continue to do so in the months to come.  A strengthening dollar will create growing headwinds for U.S. exporters, particularly as the EU, U.K., Japan and others deal with a growing energy crises and economic recessions.

But Eisenberg notes that there are some bright spots on the current economic landscape. Oil prices have come down significantly, which will help decrease shipping costs. Supply chains still face challenges but have noticeably improved. Trucking demand has softened, spot container prices have practically fallen off a cliff and material costs will decrease going forward.

“Inflation will come down,” he says. “The question is how much and how quickly.”

Unfortunately, the good news did not extend to the labor market. He noted that there are currently 1.7 jobs per person in the U.S., due in part to so many Baby Boomers deciding to retire early as well as the 1.1 million excess COVID deaths, of which 400,000 were employees. The subsequent worker shortage is fueling the rise in wages, as are varying levels of inflation throughout global economy.

As for when the recession is likely to begin, he predicted, “Typically, we see two years between rate hiking and the start of a recession,” he explains. “But the Fed is hiking very quickly, raising rates four times in four meetings, and will probably continue to hike them into 2023, so I think it will hit much earlier–sometime around the end of Q1, probably no later than the end of Q2 in 2023.”

However, he was quick to note that he doesn’t think it will be a very deep recession for the U.S. “Maybe 12 months,” he says. Here’s hoping he’s right!

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