
NEWARK – Classic indicators of economic recession are flashing, even as the hiring market remains strong, meaning the public should anticipate a mild downturn later this year, according to a leading regional economist who addressed state business leaders Monday.
Flagging stock prices to end 2022, dragging down major indexes like the S&P 500 by 19% and the Dow by 10%; the bond market’s inverted yield curve, producing greater interest rates for short-term investments; rising levels of retail inventories, drawn from fewer consumer sales and leading to fewer wholesale and manufacturing orders; along with falling consumer confidence in monthly polling are all signs that we may be heading for a recession said Anirban Basu, the CEO of Baltimore-based Sage Policy Group, at the annual economic summit for the New Castle County Chamber of Commerce at the University of Delaware’s Clayton Hall.

“I think that over the course of months, we’ll see the momentum start to wane,” he said. “The global economy is weakening as well; the U.S. economy is weakening as rate costs are higher and excess inflation persists if the Fed doesn’t keep its foot on the brake.”
The potential downturn was intended in part by the moves of the Federal Reserve, which has increased the nation’s benchmark interest rate to a range of 4.50% to 4.75% after starting 2022 at 0% to 0.25%. By making money more expensive, it will curtail lenders and borrowers from expensive purchases, ranging from corporate equipment to real estate to cars. Mortgage applications and residential building permits have fallen in the last few months, which will have a widespread trickle-down impact.
Basu, who is well-known for localized economic reports for states, counties, trade associations and more, said he expected disparities in some markets, with the American South benefitting from a migration in population. That will inevitably lead other areas, including the greater Philadelphia region, into increasing debates over land use and job creation to build housing and jobs, he said.
One factor that troubled Basu was the post-COVID workforce participation data, which showed that young men in particular were not engaged. Comparing workforce data between 1980 and 2022, nearly 10% fewer men were participating in the workforce while women have grown 5.5%.
While only the youngest women saw a decline over the period, men have seen labor declines in every age group, with the steepest between ages 16 and 19 falling 23% while those between 20 and 24 fell 14%.
“Young men in their prime working years are not working,” Basu said, noting that the reason why is not well established. “It’s often said that men make more than women, and that’s true, but not for young men.”
The lack of young men in the labor force is only exacerbating a workforce shortage, which saw 11 million open job listings in December, or roughly two for every available worker. The nation’s birth rate has dropped in recent decades and immigration has been too slow to compensate, which created a workforce gulf when many Baby Boomers retired early through the pandemic. Today, the hiring market remains hot, but the record low unemployment rates are counterintuitively troubling too, Basu said.
“These unemployment rates are far too low. How do you grow an economy with basically no one left to hire?” he said.
Despite some of those concerns, Basu said the nation was not yet in a recession.
“It’s really been a quite fabulous recovery to date. We come into 2023 with momentum. We know we’re not in a recession after Friday’s monstrous jobs report,” he said, referring to the national report that 514,000 jobs were created in January, nearly three times what many had predicted.
Another boon to some industries has been relatively strong consumer spending, although that has also exacerbated inflation.
“In many cases, the American consumer has stared inflation right in the eyes and spent right through it,” Basu said, noting, for example, that airfares have risen 43% over the past year.