The National Economy
U.S. inflation-adjusted GDP growth for the first quarter of 2023, was recently revised upward to 2.0%, marking three consecutive quarters of positive growth. This occurred despite the Federal Reserve’s aggressive interest rate hikes, which have brought the Prime Interest Rate from 3.25%, where it was from March 2020 through March 2022, to 8.25% as of May 2023. The Fed has been raising rates in an effort to combat high inflation, which has been challenging for businesses and consumers alike. While inflation remains well above the Fed’s target of 2.0%, it has declined substantially, from a peak of 9.1% in June 2022, to 4.0% in May 2023. Falling energy costs have been a significant factor in declining inflation. Energy prices declined by -11.7% in May, year-over-year. Food prices continue to increase overall, rising by 6.7% despite significant declines in eggs and dairy products.
The consensus among leading economists is that the probability of a U.S. recession in 2023 has declined compared to earlier forecasts. Goldman Sachs currently forecasts a 25% chance of recession in the next 12 months. Factors positively influencing this forecast are the temporary resolution of the U.S. debt ceiling issue, and the containment of stress in the banking sector after the high-profile failure of several banks. Growth has also received a boost from a growth in consumer disposable income and stabilization of the housing market. Forecasts for overall 2023 GDP growth range from 1.0-1.8% 1
The job market remains extremely tight by historical standards. Headline unemployment was 3.7% in May. Beyond a very low rate of unemployment, there remains a large number of unfilled job openings in the economy. There are currently only 0.6 unemployed workers per job opening nationwide. Put another way, there are just under two job openings for each job seeker, indicating that those seeking employment have a number of options available to them.
Net Farm Income Projection
Source: USDA ERS & Farm Credit East Estimates. Does not include forest products or commercial fishing.