Job market in US will take a serious hit even in a ‘mild’ recession

Among economists who expect a downturn, the average of 15 predictions suggests the economy will shed about 1.7 million jobs over the next year

The US Federal Reserve building. Staff at the Fed expect a 'mild recession' to begin later this year. Reuters

Most Wall Street economists expect the US to fall into a recession during the coming year. What does that mean for American workers?

Using the Jobs Calculator developed by the Federal Reserve Bank of Atlanta, combined with forecasts for peak unemployment, here’s a look at how job losses could accumulate.

Among economists who expect a downturn, the average of 15 predictions suggests that the US economy will shed about 1.7 million jobs over the next year or so – roughly 120,000 a month.

But every recession is different, with an impact that depends on lots of things including what caused it and how long it lasts.

In some cases, unemployment reaches its highest point while the economy is still shrinking, and in others the peak comes months after the downturn has officially ended.

Forecasting if and when a recession will begin – and how high unemployment may rise as a result – is notoriously difficult. Economists still try.

A word many of them are using at the moment to describe the expected downturn is “mild” – but even that scenario would involve hundreds of thousands of Americans, at a minimum, losing their jobs.

Using the baseline assumptions in the Atlanta Fed’s model, unemployment at 4.2 per cent or above in a year’s time will mean that monthly US payrolls have turned negative.

Bank of America is predicting a recession beginning in the third quarter of this year, which causes the unemployment rate to rise to 4.7 per cent in early 2024.

The implication? According to the Atlanta Fed's Jobs Calculator, that would equate to about 97,000 net job losses each month until then – or some 1.1 million net jobs lost by the time of peak unemployment.

Deutsche Bank forecasts recession beginning in the final months of this year and unemployment rising to near 5.5 per cent in the second quarter of 2024, which would lead to 149,000 net job losses per month for a total of 2.1 million jobs.

UBS projects recession begins in the third quarter of this year; unemployment rises to 5.4 in mid-2024, with 137,000 net job losses per month and a total of 1.9 million jobs lost.

Nationwide expects a recession in the third quarter of this year, with unemployment rising to 5.5 per cent in the third quarter of 2024 as net job losses per month reach 106,000 and the total lost climbing to 1.8 million.

Jefferies expects a recession beginning in the third quarter of this year, unemployment rising to 6.5 per cent in the third quarter of 2024, with 202,000 net job losses per month and a total hit of 3.4 million jobs.

US Federal Reserve Chairman Jerome Powell has indicated the country could skirt a downturn, but staff at the Fed expect a “mild recession” to begin later this year.

The median projection among Fed board members and regional bank presidents in March was for unemployment to rise to 4.5 per cent in the fourth quarter and remain elevated next year.

That would equate to about 128,000 job losses each month through the end of this year.