The US economy could be heading into a recession as early as the first half of 2023, analysts warn.

“I think there is probably going to be in a recession by the second quarter,” Steven Blitz, chief US economist at macroeconomic forecasting consultancy TS Lombard, said in a new podcast from research firm GlobalData. “And it think it’s going to be a mild recession that will last two quarters, the second and third quarter.”
However, he warned that analysts still “can’t see yet what is going to drive it down and that’s part of the problem.”

Blitz argued that the Federal Reserve has raised the risk of a recession by keeping interest rates “too low for too long” and that it is now raising interest rates at an accelerated rate to adjust for the pumped-up and empty growth the US economy enjoyed over the course of the pandemic.

“The economy had this huge 6% growth in 2021, and the US economy is just not primed to grow at that pace,” Blitz said. “So, it decelerated last year and in that deceleration there were some winners and a lot more losers.”

Blitz argued that a lot of the market crash that we’re seeing now has been caused by a lot of misreading of the data, where people misread the abnormal market boom was actual growth. In response to what they thought was an extraordinary bull market, a lot of companies invested heavily in things like staff and inventory.

“It was like having a sugar high or just [being] drunk and then, at some point, in the middle of the evening, you stop drinking and then you just crash,” Blitz said.

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“The whole up and down was a created event and who you are underneath that hasn’t really changed, except that you’ll say ‘I won’t drink like that ever again.’”

The recent mass-layoffs among Big Tech firms can be seen in this light, with Meta CEO Mark Zuckerberg having admitted to being overoptimistic in 2021 and had hired too many people as a result.

GlobalData is the parent company of Verdict and its sister publications.