While the U.S. may avoid a recession in the next year, consumers will continue to face the underlying challenges of an uneven economy fostered by the global pandemic and political turmoil following Russia’s invasion of Ukraine, according to Mike Schenk, CUNA’s chief economist and deputy chief advocacy officer for policy analysis.
Schenk, speaking at the 2022 African American Credit Union Coalition Conference in St. Petersburg, Fla., says the economy continues to grow despite the Federal Reserve’s recent efforts to slow inflation by increasing the federal funds rate.
“The level of pent-up demand in the marketplace is meaningful and could bring us through the next year and a half without this turning into an actual recession,” he says. “About two-thirds of U.S. economic activity is related to consumer consumption. It's related to what credit unions do—lending—what our members do—spending and borrowing—and how we interact from an economic perspective.”
He notes that consumers aren’t saddled with debt as they typically are when a recession looms.
“Overall, consumers have more disposable income,” Schenk says, in part because millions refinanced their homes during the pandemic, folding higher-rate debt into long-term, low-rate mortgages. “That’s meaningful in that they can more easily meet their debt obligations and even take on new debt obligations.”
Schenk also says the supply chain disruptions that have plagued the economy will be less impactful in the next six months based on Federal Reserve district bank manufacturer surveys.
He offers four “sure bets” for his economic forecast:
In addition, the combination of fast-rising personnel and technology costs and slower asset growth suggest operating expense ratios will drift up.
Another cloud on the horizon: underlying weak pockets in the uneven economy. While unemployment has largely recovered from near all-time highs at the outset of the pandemic, many Americans, especially those in the hospitality sector, remain unemployed at rates higher than during the Great Recession of 2008.
“That's impactful,” Schenk says. “Millions of Americans are financially unwell and many are actually in a lot worse shape than they were pre-pandemic. That's a big deal.”