Economist dishes out dire economic forecast at Cornerstone economic breakfast
Audience members who had just finished their eggs and hash browns at Wednesday's 19th annual Cornerstone National Bank & Trust Company Economic Breakfast in Palatine might have been tempted to reach for an antacid following economist Robert Genetski's predictions of what lies ahead for the economy.
"I believe real growth is going to be down," he said at the breakfast, held at Cotillion Banquets. "We're going to have a recession."
He forecast that real growth will be down 1% to 3% in 2023, while inflation and housing prices will be up 3% to 5%, with oil prices at $70 a barrel and the S&P between 3,000 and 3,600.
Genetski noted that Illinois' housing prices are especially weak compared with other areas.
In the Chicago area, he said, home prices are 40% below a 20-city average, according to the Case-Shiller Index of Existing Home Prices.
Moreover, he said, the state's unemployment rate continues to hover above the rest of the nation, below where the economy was pre-pandemic. The only neighboring Midwestern state exceeding the pre-COVID level is Indiana, he said.
Genetski said a recession would result from two factors: abandoning principles of economic freedom and a tightening by the Fed.
Genetski was especially critical of government spending, in what he called transferring money "from the private, productive sector of the economy into the nonproductive government sector of the economy."
This, he said, has resulted in a huge drop in the nation's productivity.
He said interest rates are going to continue to go higher as the Fed continues to tighten monetary policy.
The main effects will be seen in early 2023 and will affect most business, he said.
"One of the things that may not be as difficult is the supply-chain shortages that we have seen in the last year. As demand eases, all of those should get better. And I believe most businesses are reporting that those are already starting to ease up."
Also, he said, there will likely continue to be a shortage of workers.
"So what businesses have to do during this upcoming period is be sensitive to both their workers and their customers, because their workers and their customers are going to be going through the same type of economic hardships," Genetski said.
Genetski did save some soothing words for the end, although not for everyone.
"This is temporary. There will be then a recovery. A lot of the weaker companies drop out during the tough times and then when recovery comes, they're not around. And so the ones that are able to make it through end up being in a stronger position."
He also advised investors that it is too early to aggressively buy stocks and bonds.
"I believe that the cycle has not run its course," he said.
As for a major economic shift, he said: "It's going to take a major change in federal policies. We have to get this money that's shifted into nonproductive areas ... that money has to shift back to the private, productive area to see a major turnaround in the economy."
Above all, he said, "We still live and work in the greatest economy in the world."