The Chicago Journal

Bank of America predicts high unemployment rate in 2023

Efforts to curb inflation have prompted the Federal Reserve to act, but the Bank of America warns that this could lead to mass unemployment.

Bank of America noted the Fed’s aggressive rate hikes and said the US economy will lose tens of thousands of jobs each month early into 2023.

While September showed a strong job market, the Fed is doing everything it can to turn things around by raising interest rates.

Aggressive interest increases will therefore lead to a decrease in the demand for cars, homes, and household appliances.

Inflation pressure

The Fed’s fight against inflation is adding pressure, which means nonfarm payrolls will begin to decline in early 2023.

As a result, Bank of America said more than 175,000 jobs were lost each month in the first quarter of the year.

The bank’s charts suggest there will be job losses for the majority of 2023.

“The premise is a harder landing than a softer one,” said Michael Gapen, the head of US economics at Bank of America.

Ideally, the Fed would have dampened the labor market enough to bring inflation back to healthy levels without causing significant and permanent job losses.

However, Bank of America does not believe the Fed will make such a decision.

“We are looking for a recession to begin in the first half of next year,” Gapen said.

Unemployment peak

Friday’s jobs report showed the United States added more than 263,000 jobs in September despite the market slowdown.

It brought the unemployment rate down to 3.5%, the lowest level since 1969.

However, Gapen expects unemployment to rise between 5% and 5.5% next year.

Meanwhile, the Fed forecasts an unemployment rate of 4.4% in 2023.

The US Federal Reserve is raising interest rates at the fastest rate in four decades to curb inflation.

Fed officials said they were in no rush to exit inflation-fighting mode to help the economy avoid a slowdown or recession.

“They’ll accept some weakness in labor markets in order to bring inflation down,” said Gapen.

Fed officials say interest rates need to remain at “restrictive” levels for some time.

Gapen said that while recessions have “quick snapbacks,” the Fed’s stance on keeping interest rates high for an extended period suggests the situation is protracted.

“We could see six months of weakness in the labor market,” he said.


Meanwhile, some forecasters are optimistic about the state of the job market.

On Monday, the Conference Board announced that the September Employment Trend Index had been ticked.

The index is a combination of leading labor market indicators.

They said that this meant employment growth in the coming months, but that employment growth would likely slow from its recent pace.

On the bright side, however, people calling for a recession won’t see unemployment rise like in 2008 or 2020.

Bank of America expects the unemployment rate to peak at 5.5% in 2023, after peaking at nearly 15% in 2020.

“Although nobody wants to be callous about someone losing their job, this could be classified as a mild recession,” said Gapen.


US economy will soon start losing 175,000 jobs a month, Bank of America warns