Perhaps, but we’ve been through worse

By Joe Higgins, Quest 4 Quality

Economists generally don’t like the “R” word, but recessions are a part of a normally functioning economy.

America has experienced 13 recessions since the end of World War II, and I believe we are headed for another downturn either late this year or in early 2023. Recessions usually occur after the end of a long period of economic expansion, but times are a little different today.

For example, the 2020 recession was a COVID-19-induced decline, and the Great Recession of 2008 began in response to the housing crisis and worthless mortgage-backed securities. The current crunch is being driven by the pandemic, a still-recovering supply chain, an overactive job market, rising energy prices, the stock market retreat, the Federal Reserve raising interest rates, and a war in Ukraine. It is my assessment that the risk of recession between now and the end of 2023 is between 20% and 30%.

No one could have foreseen the impact of Russia’s invasion of Ukraine and the fact that it has now lasted over two months. This war has caused global disruptions in oil, wheat and freight that will continue until this unprovoked conflict ends.

This risk assessment may seem inconsistent with what I said at the March Summit about the economy’s strength. In 2021, America had the best gain in GDP in 40 years, the unemployment level dropped to 3.6%, and consumers were spending stimulus money and discretionary income at record rates. This was indicative of a robust economy; however, much has changed in two months, and now the future does not look as stable as it did in March.

I still believe that the U.S. will see continued job growth in 2022, and unemployment will drop to 3.4%. GDP is most likely to finish up above 2.8%, and a surge in wage growth will strengthen consumer spending, even in the face of a recession.

The most concerning thing to me is that the Federal Reserve is now attempting to control inflation with interest rate increases for the balance of this year. Fed Chairman Jerome Powell let months of complacency and stubbornness go by without making any moves, and now they are playing a catch-up game. Historically, this approach has led to recessions in past eras and by all measures is a risky dance.


The one great hedge against inflation today is home ownership or rental properties. So far inflation is up nearly 9% this year, but housing valuations are up almost 18% nationwide, and with the shortages in housing stock we are experiencing today, most experts think prices will continue to rise. The consensus is that the rapid acceleration we have seen over the past two years will slow, but it is most likely that in 2022 prices will still be up over 10%.

Conversely, it has been a rocky road for home buyers. Mortgage rates reached their highest levels in 12 years and the 30-year fixed rate is now at 5.3 % — up from 3.11% a year ago, which adds hundreds of dollars to each monthly payment. Yet, in the face of all this bad news, mortgage applications for single-family homes were still up 5% this past month as intrepid home buyers continued to pursue the American Dream of a house with a white picket fence.

This brings us to an affordability crisis as the Fed remains adamant about raising interest rates to temper inflation. Add the cost of gas and food to everything else, and the housing boom could quickly go south.

One additional note for our dealers: When the equity in one’s house increases, the homeowner is more likely to remodel and buy appliances, furniture, and electronics.

See: Lowe’s, Home Depot Shrug Off Inflation Fears

The Bottom Line

There is no hiding from inflation, and it is everywhere we shop, dine and travel. Everything will cost you more, from automobiles to restaurants to hotels. Here, however, are some possible outcomes from our current economic situation:

  1. The war in Ukraine could end soon and alleviate the pressure on oil and wheat prices. This would help lower inflation and improve supply chains.
  2. If the war ends and the economy cools, we could see a stabilization of the supply chain. Much of the problem began with the pandemic and overenthusiastic consumers.
  3. The Fed can slowly pull back the economy by raising interest rates without causing a recession. This is a best-case scenario that’s also unlikely.
  4. After reaching bull market territory, the stock market could begin the climb back. It may take a while, but it would be consistent with history.
  5. The job market continues to surge as wages rise and consumers increase their spending levels.
  6. Lastly, if we do have a recession, it won’t be anything like the 2008 debacle we all lived through.

Joe Higgins is a 44-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YSN contributor. Visit his website, Quest 4 Quality with Joe, at

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