Concerns about an impending recession have been widespread over the past couple of years, triggering discussions about its potential impact on unemployment rates and fears of a foreclosure wave akin to the events 15 years ago.
However, the latest Economic Forecasting Survey by the Wall Street Journal (WSJ) brings a new narrative. For the first time in over a year, fewer than half (48%) of economists foresee a recession within the next year:
“Economists are growing optimistic about the U.S. economy... Their consensus indicates a reduced likelihood of a recession in the coming year, dropping from an average of 54% in July to a more positive 48%. This marks the first instance of the probability falling below 50% since last year.”
With more than half of the experts no longer anticipating a recession in the near future, it’s natural to assume a limited expectation for a significant surge in the unemployment rate. Data from the same WSJ survey illustrates the economists' projections for the unemployment rate over the next three years (refer to the graph below):
While projections indicate potential job losses in the upcoming year, any form of job reduction bears a heavy toll on individuals and their families. However, the crucial question remains: will these job losses trigger a foreclosure wave, destabilizing the housing market?
Drawing insights from historical data courtesy of Macrotrends and the Bureau of Labor Statistics (BLS), the answer appears to be no. Presently, the unemployment rate stands close to record lows (as indicated by the blue bar in the graph below):
Comparatively, the average unemployment rate since 1948 stands at 5.7% (depicted by the orange bar), whereas during the housing market crash following the 2008 financial crisis, the rate peaked at 8.3% (highlighted by the red bar). Both these historical averages significantly surpass the current unemployment rate.
Projections indicate that the unemployment rate is likely to remain below the 75-year average, suggesting no imminent wave of foreclosures that could severely disrupt the housing market.
The shift in economist sentiment leans towards a reduced likelihood of a recession in the upcoming 12 months. This sentiment aligns with a diminished expectation of a substantial uptick in unemployment rates, curbing concerns about a foreclosure surge triggering another housing market crash. For insights on unemployment's potential impact on the housing market, seek guidance from a real estate professional.