Concerns about an impending recession have been widespread in recent years, fueling worries about a potential surge in unemployment rates and a recurrence of the foreclosure crisis experienced 15 years ago. However, the most recent Economic Forecasting Survey by the Wall Street Journal (WSJ) delivers a shift in perspective. For the first time in over a year, less than half (48%) of economists anticipate a recession within the next year:

“Economists are turning optimistic on the U.S. economy . . . economists lowered the probability of a recession within the next year, from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability below 50% since the middle of last year.”

With more than half of the experts no longer foreseeing a recession in the near future, one might logically infer that the unemployment rate is not expected to experience a significant surge. The accompanying graph, derived from the same WSJ survey, illustrates economists' projections for the unemployment rate over the next three years.

If these projections hold true, job losses may occur in the coming year, posing significant challenges for those affected and their families. However, the crucial question arises: could these job losses lead to a foreclosure wave that crashes the housing market? Historical data from Macrotrends and the Bureau of Labor Statistics (BLS) offer valuable insights. Despite potential job losses, the current unemployment rate remains near historic lows.

As indicated in the graph, the average unemployment rate dating back to 1948 is 5.7%, significantly higher than the current rate depicted in today’s result. Even during the aftermath of the 2008 financial crisis, when the housing market crashed, the average unemployment rate reached 8.3%, surpassing today's levels.

Moving forward, projections show the unemployment rate is likely to stay beneath the 75-year average. And that means we won’t see a wave of foreclosures that would severely impact the housing market.

In summary, the majority of economists no longer foresee a recession in the next 12 months, diminishing the likelihood of a substantial rise in the unemployment rate that could trigger a housing market crash. If you have inquiries regarding unemployment and its potential effects on the housing market, feel free to connect with us.