Citi Global Wealth Investments (CGWI) has issued its latest outlook report, and it is predicting there will be a mild recession in 2023, as unemployment rises above 5%.
The outlook report also predicts that 400,000 construction jobs will disappear in 2023, as the overall economy loses 2 million jobs across all sectors.
Steven Wieting, chief investment strategist and chief economist at CGWI said, “Housing that was started a year ago was at a higher sales pace and a dramatically lower mortgage rate. While they finish those houses, they’re still employed. Then when you are done with that house you don’t have a new job to go to — and that’s how the coming year we think we lose all of those jobs.”
David Bailin, chief investment officer and head of Citi Global Wealth Investments said, the report pegged next year’s unemployment hitting roughly 5.25%, noting the recession we see “won’t be that deep, but it will be meaningful.”
He went on, “We expect for next year, employment will fall by 2 million people. That’s how we define our recession. We think there will be one, and it will be defined by that loss of jobs.”
That figure of lost jobs represents about one quarter of the total number of people who were unemployed in 2009.
Companies which serve the housing sector are already noticing the changes. High-end furniture maker RH’s CEO recently said to analysts, “It’s just a lot of uncertainty right now.”
He continued, “But one thing I’m certain of: The housing market is collapsing at a level I haven’t seen since 2008. I haven’t seen this kind of drop since 2008.”
In terms of opportunities, the CGWI report identifies a few for investor portfolios. Bailin and his team emphasize however, that for now, caution is the order of the day, and one should closely focus on high-quality defensive equities and bonds.
Bailin added, “Historically, no bull market has ever begun before a recession has ever started. So it’s highly unlikely that we’ve seen the lows [of the equity markets].”
He added, “From the time the recession begins, whenever that is, the bull market recovery typically begins halfway through it.”
