2023 Economy Characterized by Uncertainty, Economist Says

SWAINTON – The message from Stockton Associate Professor Oliver Cooke is that uncertainty hampers attempts at economic forecast for 2023.
Cooke gave his South Jersey Economic Forecast to the Cape May County Chamber of Commerce at the Avalon Links Restaurant, Jan. 19, saying that uncertainty characterizes the national economy where he sees plenty of conflicting evidence of where the economy is going.
As for South Jersey, Cooke projects that the regional economy will track the national one closely.
Cooke began his presentation with a review of current employment and labor force statistics. The theme nationally and locally was the same.
The pandemic year of 2020 had devastated the economy, leading to the shedding of 5 million jobs nationally and 5,400 jobs in the local Cape May County economy.
2021 was a boom year, with a dramatic rebound in jobs, labor force participation and declining unemployment.
Cooke said the county recovered 4,000 of the lost jobs in 2021, with another 1,600 in 2022, putting the local economy slightly ahead of pre-pandemic levels.
According to Cooke, the Ocean City Metropolitan Statistical Area, a census designation for Cape May County, had the fourh best gross domestic product (GDP) recovery in 2021 of the over 300 statistical areas monitored by the census bureau.
Leisure and hospitality jobs recovered the largest portion of the 2020 loss, followed by the transportation and utility sector and local government employment. Retail trade was steady through the recovery.
The “great resignation,” as it was called, helped produce the lower unemployment levels since individuals who leave the workforce are not counted.
Cooke said that the labor force numbers also rebounded in 2021. He used statistics from February 2020 to November 2022 to bolster the argument.
Turning his attention to the most recent year, Cooke characterized the 2022 summer season as strong, coming on the heels of the remarkable rise in 2021. Motel and hotel tax receipts told the tale, with over $10 million in tax revenue.
Cooke also pointed to the phenomenal streak of rising single-family home prices. 2022 was the eighth consecutive annual gain in prices, only slightly off from the peak year in 2021.
He referenced 2014 as the low point in home prices following the 2008/2009 recession. Since then, Cooke said home prices have been up an average of 62%, and even higher in some areas. He expects the real estate market to slow in the coming year.
His outlook for the coming year showed many areas of economic strength, with a solid growth in the GDP to date, national job gains that are 1 million over 2019 levels, a low unemployment rate and rising labor force participation.
On the downside, the equity markets experienced their worst year since 2008 and auto sales are the weakest they have been in a decade.
Clouding the picture further is inflation, which, despite downward movements, is, Cooke projects, the key factor that will dictate federal reserve policy, markets and corporate sentiment.
Cooke’s reading of the Federal Reserve Chair Jerome Powell’s comments lead him to believe that the Federal Reserve will continue to battle inflation with rate increases and “let the job market do whatever it does.”
The continued strong job market will complicate the fed goal for a soft landing, Cooke believes. He pointed to continued large corporate layoffs, especially in the tech sector, as another of those markers of uncertainty.
With the housing market already cooling considerably, Cooke pointed to the fact that second home sales have been key to part of Cape May County’s pandemic recovery. A slower housing market could also have uncertain impact.
Cooke said that more than two-thirds of the economists at 23 large financial institutions are predicting a recession of sorts in 2023. Major banks set aside $3 billion in the fourth quarter of 2022 to cover expected loan losses this year.
For Cooke, the wildcards in the 2023 picture also include the Ukrainian war fall out and the continued direction of fiscal policy with the changes that have occurred in Congress.
We are up against one of those decision points now with the need to raise the debt ceiling, he noted.
Cooke admitted that he is not fond of trying to project the economy’s future actions. In this case, it appears even more difficult because the signals are mixed. Characterizing the near term as uncertain may be the most certain projection one can make. 
Thoughts? Questions? Contact the author, Vince Conti, at vconti@cmcherald.com.