The US economy will tip into a recession next year, as the Federal Reserve struggles to bring down firmly high inflation, as per The Wall Street Journal's latest survey of economists.

The probability of a recession in the next 12 months is now 63%, up from 49% in July's survey, according to the report. It is the first time the survey has put the probability above 50% since July 2020, following the previous short but sharp recession.

Their projections for 2023 are becoming increasingly pessimistic. Economists now expect GDP to contract in the first two quarters of the year, a downgrade from the previous quarterly survey, which predicted mild growth.

Economists now predict that GDP will contract at an annual rate of 0.2% in the first quarter of 2023 and shrink by 0.1% in the second quarter. According to the July survey, they expected 0.8% growth in the first quarter and 1% growth in the second.

Employers are expected to cut jobs in the second and third quarters in response to slower growth and lower profits. 

Nonfarm payrolls are expected to fall by 34,000 per month on average in the second quarter and 38,000 in the third quarter, according to economists. 

According to the most recent survey, employers expected to add about 65,000 jobs per month during those two quarters.

Forecasters have raised their expectations for a recession because they are increasingly skeptical that the Federal Reserve can continue to raise interest rates to cool inflation without causing higher unemployment and an economic downturn. 58.9% of economists believe the Fed will raise interest rates too quickly, causing unneeded economic weakness, up from 45.6% in July.

According to economists' average forecasts, a recession will be relatively short-lived. The average expectation for the length of a recession among economists who see a greater than 50% chance of a recession in the next year was eight months. The typical postwar slump lasted 10.2 months.

They expect the economy to grow 0.4% in 2023 through the fourth quarter compared to the fourth quarter of the previous year. They forecast 1.8% growth in the economy in 2024.

Most economists believe the Fed will have to reverse course and begin cutting rates late next year or early in 2024. 30% of economists expect the Fed to cut rates in the fourth quarter of 2023, and 28.3% expect the next cut in the first quarter of 2024.

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