January 31, 2023
Don’t leave the umbrella at home, but a local financial sector leader said the economic forecast for this year appears to be clear skies.
Backing that up is federal data showcasing economic growth coming into the year, despite questions about whether a recession is on the horizon. The U.S. Department of Commerce reported earlier this week that gross domestic product rose at a better-than-anticipated 2.9% annual rate through the final months of last year.
Christopher Maher, CEO of OceanFirst Bank, said that’s just one of the reasons to be cautiously optimistic — a phrase economic prognosticators have thriftily reused about markets in recent years — about the economic forecast for 2023.
He admits there have been some blemishes to start the year, between widespread layoffs in the tech sector and a stubbornly persistent inflationary environment. There could be a slow first half to 2023 as a result of that and other trends.
“But, I think you’ll see a return to more of a growth pace by the end of the year,” Maher said. “We may have the opportunity for rates to be in a better position then. And the mortgage market may come back.
“Obviously, the growth will be at a slower pace than last year, but we expect a healthy economy for the full year.”
After inflation gauges hit alarming highs in the summer of last year, the latest federal data suggests inflation could be moving lower. Maher values that downward trend highly, even if the overall level of inflation remains at levels that particularly affect the finances of low- and moderate-income families.
And it’s for that reason that he said continuing to keep inflation in check from a policy perspective will remain important.
“We’re moving in the right direction,” he said. “We’re encouraged to see the cost of goods coming down. Supply chains are coming back to a more normal place, even if it’s not normal still. And we’re watching closely to see if the services economy (bounces back) as well.”
The labor market is also going to determine how shallow or deep the impact of a recession will be. Given what he’s currently seeing, Maher doesn’t fret much about a recession this year.
“While there have been a lot of high-profile layoffs mentioned, at companies such as Microsoft, if you look at layoff announcements, the aggregate number in the U.S. economy is running a little lower than the normal trend,” he said.
Maher expects employers this year to be hesitant to abandon too much talent after the difficulties many of them encountered last year in tracking down job candidates. Unemployment remaining under 4% in the latest national updates provides him confidence in the short term, even if Maher noted that temporary work hours — an early indicator of pullbacks in employment — are down.
From the perspective of OceanFirst Bank, Maher said the bank has scarcely, if ever, posted better credit risk numbers than it did in its last quarter’s earnings report. Nonperforming assets are declining. All of the statistics tied to its commercial base are positive.
In New Jersey, the traditional industry areas of strength — namely, logistics and life sciences — are prepared for booming business this year after some enormous investment last year, he added. The promise of a new film sector opportunity with Netflix opening a studio in Monmouth County adds to the state’s future prospects.
“The other thing we’ll be watching this year is New Jersey’s real estate market,” he said. “For now, it’s stable. That might be hard to reconcile because the unit number of transactions has slowed down over the past year. But there’s also just not a lot of inventory … and what there is, is moving quickly. And the prices are up 6% year-over-year. While there’s work to do around the affordability of housing, that number is healthy. It’s also not an indicator of a coming severe economic downturn.”