KSU economist: Recession likely in 2023

February 1—CUMBERLAND — The US economy has about a two-thirds chance of experiencing a recession before the end of this year, a Kennesaw State University economist told businessmen and women Wednesday.

Roger Tutterow, an economics professor and director of the Econometric Center at KSU, said the economy would more than likely experience a “mild correction” in 2023 at Synovus bank’s annual economic forecast breakfast at the Cobb Energy Performing Arts Center.

Tutterow displayed a graph with data from economic think tank The Conference Board that showed leading economic indicators on a downward trajectory. The index aggregates 10 series of data which “turn up before expansions and down before recessions,” in Tutterow’s words.

The indicators have fallen for eight consecutive months, and the six-month moving average is down 4.2%.

“We have never had that significant of a drop in the (leading economic indicators) and not had a subsequent recession,” Tutterow said.

Last April, Tutterow said he forecasted a 30% risk of recession before the end of 2023. By August 2022, his forecasted risk had grown to 40%. By the end of last year, he had raised it to “about two-thirds.”

His advice to the crowd? Don’t panic.

“I think it’s fair to say that the risk of a recession over the next 12 months is elevated,” Tutterow said. “So we make some choices about maybe hoarding a little bit of cash, maybe not deploying capital as quickly as we might otherwise do.

“But what you can’t do is allow what should be a relatively mild correction to pull you off your long-term strategic plan. You have to manage in a way that allows you to be a little bit more measured in activities that you take , particularly the first half of this year. But I do think you still need to be focused on the longer term outlook and creating comparative advantage, vis-a-vis your neighbors and your competitors.”

Kevin Blair, president and CEO of Synovus, said that uncertain economic times can also present an opportunity for businesses.

“Warren Buffett said, and I steal his quote all the time, ‘When those around you are greedy, it’s time to be fearful,'” Blair said. “And so what we’ve had for the last 10 years of zero interest rates and free money, we had a lot of greedy people. And I think you had to be a little cautious and pragmatic as you take risks. But he also said ‘When those around you are fearful, it’s time to be greedy.’ And what I think he meant was, when there are times of crisis, that’s when market share changes hands.”

The ‘R’ word

The specter of “the dirty ‘R’ word — recession,” was a main theme of Tutterow’s talk.

A recession is sometimes defined as two consecutive quarters of negative gross domestic product growth. That was seen in the first and second quarters of 2022, when GDP declined by 1.6% and 0.6%, respectively. In the third and fourth quarters of last year, the economy grew by 3.2% and 2.9%, respectively.

Tutterow said that the first half of last year did not, in fact, represent a recession, if you looked closely at the numbers, because most of the weakness was confined to the trade sector, which was still plagued by supply chain disruptions.

The last two quarters of strength, likewise, look better on paper than they actually were, he said, because much of the growth was due to the supply chain recovering, and product inventories correcting.

“So we really have been a little more sluggish than what the headline GDP numbers tell you,” Tutterow said. “Now, the other reason that is an issue is, if so much of our GDP was building up inventories in the fourth quarter of last year, that it means that as we get into 2023, we’ve got to get rid of those inventories . . . And when we do that, production and employment may well suffer.”


The leading economic indicators graph Tutterow displayed was one of more than 20 he employed in his presentation. And it was one of two he called “really ugly.”

The other one was the University of Michigan’s consumer sentiment survey, which has declined steeply since spring 2021. The survey measures how consumers feel about the state of the economy.

Leading that trend, he said, is the public’s concern over gas prices.

“Our research says that fuel prices exert a disproportionate impact on perceptions of inflation,” he said.

Gas prices have started to moderate in recent months. That’s good news, not just for motorists, but for economic projections.

“Hopefully that will give us some rebuilding. Because if we do not get consumer sentiment back up in the normal range over the next several months, then the risk of recession remains elevated,” Tutterow said.

Speaking about the main economic force making headlines in recent years, Tutterow said that inflation has moderated but “is still too high.”

One indicator of inflation, the consumer price index, last June was up 9.1% over 12 months. Last December, it was up only 6.5% over 12 months.

“Happy Days, only 6.5% percent inflation,” Tutterow said sarcastically.

Inflation is moving in the right direction, though. Tutterow forecasted a consumer price index in the “mid-to-high 3% range” by the end of the year.

Businesses need to factor in inflation when looking at their books, Tutterow said. Because for 35 years, the US had low inflation.

“And we forget that when you’re in a higher inflation environment, your top line, your revenue, will go up, just because of inflation. Your cost will go up, reflecting inflation. And that bottom line net income may well rise, just because of inflation. … You need to take your financial statements in your businesses … (and) demarcate, was there an inflationary effect versus real growth, inside my enterprise,” Tutterow said.

The Federal Reserve was expected to announce another interest rate increase Wednesday, the eighth increase since the start of 2022 intended to curb inflation.

Tutterow said interest rates may be higher than they were in recent decades, but they are still historically low. He expects them to peak around 5% later this year.

Those rates mean that few people will be looking to refinance their mortgages, Tutterow said.

In a potential recession, Tutterow said there will be far fewer foreclosures than in the 2008 recession, because banks have been more cautious about lending money for homes to borrowers.


Employers have consistently struggled to fill jobs since the pandemic started. Part of this, Tutterow said, can be attributed to a 1% reduction in the labor force.

There are roughly 2.5 million more jobs than there are people in the labor force, he said.

“Now, I don’t know why they left. So I think the great resignation is real. Some people have opted out, and they’re not going to return, at least until they open their 401(k) statements, and they may rethink it. But the point is, labor shortages are here to stay,” Tutterow said.

The number of jobs in the US recovered to pre-pandemic levels last August, and has remained above that level. Georgia is ranked 8th among states in post-COVID-19 job recovery.

Even as investment banks and tech companies have made headlines with recent layoffs, Tutterow said there hasn’t been a broad scale reduction in jobs in the US

Real estate

Home prices skyrocketed during the pandemic, but Tutterow expects them to moderate this year. He said they could be down by about 15% by the fall, but still above pre-pandemic levels.

In the commercial real estate sector, Tutterow thinks metro Atlanta may have had some overbuilding in multifamily housing, and apartment occupancy might dip soon.

Hotel construction is recovering from the pandemic as business travel picks up again, he said.

Tutterow said that hybrid work, too, is here to stay. When looking back on the pandemic, “we’re going to be talking about the voluntary behavioral changes that came about in the pandemic and never went away.”

That also has implications for commercial real estate.

“How we work, how we live, how we shop is here to stay. And I don’t see how that doesn’t have some effect on the office market,” Tutterow said.

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