The Economy

INFLATION, RISING INTEREST RATES, SWEEPING tech layoffs, a crypto meltdown. At the same time, unemployment remains at historic lows and the GDP hits new highs. What’s happening to the economy in 2023? Excerpted from the February 2, 2023, program “Navigating a Turbulent Economy: Annual Economic Forecast 2023” The Walter E. Hoadley Annual Economic Forecast is presented by Bank of America.

MICHAEL BOSKIN, Professor of Economics and Senior Fellow, Hoover Institution, Stanford University; Chair, President’s Council of Economic Advisers under President George H.W. Bush

MAURICE OBSTFELD, Professor of Economics, University of California Berkeley; Former Chief Economist, International Monetary Fund

ANN E. HARRISON, Economist and Dean of the Haas School of Business, University of California, Berkeley.

ANN E. HARRISON: The organizers of the World Economic Forum in Davos, held a few weeks ago, used the term polycrisis to describe a looming convergence of global risks, including world inflation, the war in Ukraine, the climate crisis.

But according to the Financial Times, the consensus among experts at Davos seemed to be that things are looking up for the global economy. Would you agree that things are looking up for either the U.S. or the rest of the world?

MICHAEL BOSKIN: Sure. If by looking up we mean the last few months relative to what was being forecast before that, yes, things on balance are looking up. Six months ago, people were forecasting a very high likelihood of a recession in the U.S., perhaps a deep one in Europe. And there was some uncertainty about China opening [up].

But since then, much of the data is looking up. The Fed’s close to the end of its interest rate hikes. They usually take 12 to 18 months to affect the real economy of output and employment. There are some other positive signs, with China opening up and

Europe seeming to weather the forecast of a really difficult winter with imports from the U.S. and Qatar, but then also a warm winter has helped to. So the energy crisis in Europe seems to have been muted.

All that said, there are some other disturbing signs. The last few months consumers have been pulling back. Housing is in bad shape, because of the tripling of