Saturday, April 1, 2023

PNC’s economic adviser: Recession coming, how to prepare now

A top economist for Pittsburgh-based PNC Financial Services Group hopes he’s wrong, but he was unequivocal in a speech to a local group last week: “We’re going to have a mild recession.

Stu Hoffman, a senior economic adviser for Pittsburgh-based PNC Financial Services Group, made the comments on March 8 at the annual PNC Economic and Political Forecast Breakfast held at Charlotte’s Quail Hollow Club.

The event also included comments by Greg Valliere, chief U.S. policy analyst for Toronto-based AGF Investments. Business North Carolina reported on Valliere’s comments about politics and finances here.

Stuart Hoffman, a senior adviser at PNC Financial, speaks March 8, 2023, at Charlotte’s Quail Hollow Club about the economic forecast through 2024.

While he spoke before Friday’s job report showing the addition of 311,000 jobs in February, he said higher-than-expected hiring would just prompt the Fed to continue to raise interest rates. That is likely to cause a recession, he says. “Sometimes good news is bad news,” Hoffman said, noting that job growth has exceeded predictions for 11 straight months.

While a likely recent recession in the second of this year will cause broad economic pain, it shouldn’t be a long, deep downturn. A year from now, it could be in the “rearview mirror,” he says.

“I hope I am wrong, there’s a first time for everything, and I hope we don’t have a recession, but this is the time to plan and prepare for it,” says Hoffman.

He predicts that North Carolina may not feel the effects of the recession as deeply as the rest of the nation based on this state’s recovery after the pandemic. For example, housing prices have soared in the state in recent years.

Hoffman advises people to put some cash in money markets or Treasury bonds, which he predicts will return 5% or better at little risk. He urged caution on stock investing.

“Be cautious on stocks, maybe put a little more money in cash, and as a result, we think if you wait six to nine months, that may be a better opportunity to take that cash and put it back into the market.”

Manufacturing appears on the edge of its own recession, and housing prices are now headed downward after a meteoric annual rise of 20% – closer to 30% in the Charlotte region, he said. On inflation, he says “we’ve hit the peak of the Mount Everest of inflation,” but higher prices will remain a problem.

Maybe the clearest sign of an impending recession may be that the country has seen the unusual circumstances of an inverted yield curve, a situation where long-term interest rates are less than short-term interest rates. “Every time that’s happened in the past 50 years, there’s been a recession, no exception.”

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