The nation’s top economists forecast that economic growth will slow from 5.5% last year to 3.3% in 2022 and 2.3% next year, according to the American Bankers Association’s Economic Advisory Committee. The committee—which is made up of 16 chief economists from some of the largest banks in North America—said it expects that the unemployment rate will decline to 3.5% by the end of the year from the present rate of 3.9%, with 280,000 new jobs on average expected to be added monthly.
“The tight labor market continues to drive wage gains across all income segments, which will encourage more people to go back to work,” said Ellen Zentner, managing director and chief U.S economist at Morgan Stanley, who chaired the EAC meeting. “More jobs with rising wages will ensure the consumer remains the bulwark of our economy in the year ahead.”
The committee forecast that resolution of supply chain issues should allow for inflation to slow from its 6.7% increase in 2021 to 3% this year and 2.4% next year. The committee also expects three interest rate increases from the Federal Reserve this year, with the economy approaching full employment and inflation above the Fed’s 2% long-term average goal. “Inflation surprises and labor market tightening necessitate an appropriate response from the Federal Reserve,” said Zentner.
The 30-year mortgage rate is expected to rise from 3.2% now to 3.7% later this year, according to the EAC forecast. Average existing home prices are expected to rise 7% this year on top of the nearly 19% increase in 2021.