Frederica Freyberg:

Inflation remains high for things like food and fuel. In response, the fed continues to hike interest rates which has cooled the home buying market. But consumers continue to spend and the job market is still hot. Those are some of the observations from our next guest here to talk with us about Wisconsin’s economic condition and the question everybody wants to know, is there a recession on the horizon? Kevin Bahr is professor of finance of UW Stevens Point and chief analyst for its Center for Business and Economic Insight. Thanks very much for joining us.

Kevin Bahr:

My pleasure, thank you.

Frederica Freyberg:

What is the condition of the overall economy right now? Are we slowing down even sliding toward a recession?

Kevin Bahr:

The general consensus for next year is that the United States will slip into a recession. But the general consensus is also that the recession should be relatively short lived and relatively minor. Relatively minor is key in that yes, people are going to get hurt but it is not supposed to be as bad as what the recession was in 2020, 2008 or the early 1980s.

Frederica Freyberg:

That is comforting. Do the recent layoffs in the tech industry spell economic downturn right now?

Kevin Bahr:

I think the recent layoffs in the tech industry, those are a little bit different from what’s going on with the rest of the economy. I think the recent layoffs in the tech industry, they have their own specific sort of company and industry issues. There will be a slowdown overall in the United States’ economy and you can expect job losses and unemployment to go up. But the tech industry is a little bit different. They’ve got their own specific issues to work through.

Frederica Freyberg:

Meanwhile, right now the overall job market even in Wisconsin is still super-hot?

Kevin Bahr:

The job market is incredibly hot. In October we had 153.3 million people working in the United States. That’s more than at any other time in the history of the United States. Wage growth in August was 6.7% at an annualized rate. That went down to 6.3% in September but that reflects the hot labor market as well as currently, in October, there were two job openings for every unemployed person. So all those factors combine into a very hot labor market.

Frederica Freyberg:

Even in the face of inflation, how is it that consumer spending is holding?

Kevin Bahr:

Well, I think part of the reason consumer spending is holding is because the job market has been so hot. You’ve got record employment levels. You’ve got wages going up. So the job market has really kind of fueled consumer spending. The increase in the interest rates by the fed last two quarters, investment spending has declined in the United States but consumption spending has increased ever since the second quarter of 2020. It has been up, up and away with consumer spending. It is lower now than what it had been last year but it’s still increasing. That is the rate of growth is lower now than last year.

Frederica Freyberg:

Does that suggest that inflation isn’t really hitting people?

Kevin Bahr:

I think inflation is hitting people, but they still have money to spend. And I would point out that inflation right now, this is global. It’s a global issue. Inflation right now is varying between 7 and 10% in Canada, Australia, the United Kingdom, Europe including Germany and Italy. So this is basically a global issue. A lot of the factors affecting those — that inflation worldwide relates to the war in Ukraine and supply chain issues.

Frederica Freyberg:

So holiday retail is always an indicator. What are the expectations for that?

Kevin Bahr:

That’s going to be something very interesting to watch. In October retail sales increased. So there are different forecasts for retail sales. When you start getting into forecasting the economy next year and whether or not you’re going to have a recession, this is almost like doing a long-range weather forecast where you’re pretty confident it’s going to be cloudy and you’re pretty confident that it’s not going to storm, but it might rain, it might not rain. And in any event, the economy is going to slow. How quickly, how fast it slows, that’s still subject to question.

Frederica Freyberg:

Well, we appreciate your prognostications and your expertise. Kevin Bahr, professor of finance at UW Stevens Point, thank you very much.

Kevin Bahr:

Thanks for having me.