Chapman University’s 2022 Economic Forecast Update Predicts a Recession as Early as Before the Year’s End | Chapman Newsroom (2023)

The following are highlights from the comprehensive report — Chapman Economic & Business Review, Volume 40 — to be presented in more detail at the June 23 Chapman University Economic Forecast Update.


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  • It’s now official – Chapman’s forecast for real GDP growth of 5.7 percent that was presented at the 2021 forecast conference in December ’20 was a bullseye. Out of 50 “Blue Chip” forecasts, it was the most accurate forecast for real GDP growth.
  • The accuracy of this forecast will allow Chapman to retain its position as having the highest degree of accuracy among all 50 “Blue Chip” forecasts in forecasting real GDP over the last 20 years.
  • Chapman’s Update Forecast presented in June ’21 was one of the first forecasts to accurately call for the sharp rise in inflation and interest rates.


  • The following is a summary of Chapman’s forecast for key interest rates in 2022.
  • Higher mortgage rates will cut into real estate investment spending in the U.S., shaving almost a half percent from real GDP growth in 2022.
  • After growing at a rapid clip of 5.7 percent in 2021, real GDP is forecasted to grow at a slower rate of 2.8 percent in 2022.
  • Three factors point to a recession occurring, most likely in early 2023 and possibly as early as late this year.
  • Continuing increases in the federal funds rate to 3 percent or higher by year-end.
  • Fed plans to reduce its holdings of T-bonds and mortgage-based securities initially by about $50 billion per month, followed by almost $100 billion per month, thereby placing downward pressure on the nation’s money supply and future spending.
  • Fiscal policy has turned sharply contractionary as the deficit declines from $3.0 trillion to $1.2 trillion – an unprecedented drop of $2.8 trillion in government spending.
  • The stock market peaked six months to one year before the start of every recession since 1970. Over those recessions, the average decline has been 33 percent from the pre-recession peak to the trough during each recession. Since the S&P 500 has dropped 23 percent since its peak late last year, that suggests the market has not fully discounted the impact of a future recession. Historical precedent suggests that, on average, the market will decline another 10 percent to “fit” the average market decline during recessionary periods.


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  • Members of the Anderson Center for Economic Research team recently completed a study, “A Model to Forecast Midterm House Elections,” that has recently been published in Social Science Research Network (SSRN) This study identified the major socio-economic and political factors that determine the swing of house seats during midterm elections for the House of Representatives. Its R2 value of 0.95 indicates that the Chapman model accurately captured 95% of the variations in the swing of House Seats for the 20 midterm elections since 1946.
  • The most surprising result of the study is that gasoline price inflation is much more important than overall price change in causing voters to turn against the President’s political party. The findings suggest that the 61 percent average increase in gasoline prices projected for this year will lead to the loss of 29 Democratic House Seats.
  • Other variables, such as the low Gallup presidential approval rating of President Biden (currently 41 percent), will also collectively lead to the loss of additional Democratic House Seats. The total loss in Democratic Seats forecasted in the Chapman study is 53 seats. That loss for the ’22 election, as compared to other midterm election results, is shown in the following chart.


  • California, currently at about 17.2 million jobs, is still about 500,000 jobs below the pre-COVID recession high of 17.7 million jobs.
  • The sharper loss of jobs in California as compared to other states is mainly the result of stricter governmental constraints (stringency) used by the state to control the spread of the COVID pandemic.
  • Now that California’s stringency, as measured by Oxford University, is closer to the U.S. average, job growth this year in California (5.5 percent) will be higher than the average growth in the U.S. (4.2 percent).
  • Negative net domestic migration (more people moving out of the state versus those moving in) of almost 300,000 in 2021 has led to a decline in California’s population of almost 200,000 people, about a half percent of the state’s population.
  • The Center’s research points to California’s relatively high state and local taxes (2nd highest in the U.S.!) as the major factor causing the out flight from California. The following chart clearly shows that states with higher taxes have more negative net migration.
  • The Chapman-UCI-UC San Diego statewide survey of 150 CEOs indicated that 63 percent of the CEOs gave California the two lowest ratings of 1 or 2 out of a 5-point scale. The most unfavorable ratings are shown in the following chart.
  • Total residential permits issued each year in California have hovered in a narrow range of 100,000 to 120,000 permits each year since 2017. That is far short of the 300,000 to 500,000 units Governor Newsom, and state housing agencies claim California needs to reduce the average number of people per housing unit.
  • Ironically, the persons per housing unit ratio in California is dropping sharply – not because California has met the Governor’s housing goals but because of low to negative population growth.


  • On an annual basis, average job growth in Orange County in 2022 is forecasted to be 5.1 percent versus 5.5 percent in California.
  • Of the total jobs increase of 188,000 in Orange County over the last year, 79,000 of those jobs were in leisure & hospitality – that’s 42 percent of the total increase.
  • As shown in the following figure, Orange County is lagging in the high-value-added Advanced Industry job sector over the 2015-21 period.
  • Orange County has lost about 5,000 to 10,000 in population annually over the 2019-21-year period. Like California, this population loss led to a decline in the number of persons per housing unit in the County.
  • Higher mortgage rates are forecasted to lead to a sharp decline in the County’s housing affordability.
  • The median home price in the County is forecasted to start declining on a quarter-to-quarter basis from the present period. On a year-to-year basis, the Chapman forecast calls for a 12 percent decline in the median home price from $1,012,000 in mid-2022 to $891,000 by mid-2023.
  • The cap rate, an important measure in the apartment industry, is forecasted to increase from a current 3.9 percent rate to 5.0 percent in 2023. This forecasted increase in the apartment cap rate is projected to lead to a decline in apartment values (not rents) of 12 percent – closely in line with the forecasted decline in home prices.

About Chapman University
Founded in 1861, Chapman University is a nationally ranked private university located in Southern California. Chapman is categorized by the Carnegie Classification as an R2 “high research activity” institution and offers personalized education to more than 9,000 undergraduate and graduate students. The campus has produced a Rhodes Scholar, been named a top producer of Fulbright Scholars, and hosts a chapter of Phi Beta Kappa, the nation’s oldest and most prestigious honor society. Based in the City of Orange, Chapman also includes the Harry and Diane Rinker Health Science Campus in Irvine. In 2019, the university opened its 11th college, Dale E. and Sarah Ann Fowler School of Engineering, in its newest facility, Keck Center for Science and Engineering. Learn more about Chapman University:

About The Anderson Center for Economic Research
The A. Gary Anderson Center for Economic Research (ACER) was established in 1979 to provide data, facilities and support to encourage the faculty and students at Chapman University to engage in economic and business research of high quality and to disseminate the results of this research to the community.


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Will there be a recession in 2023? ›

A recession is now likely in 2023. Here's what could trigger a sharp downturn in the economy. The economy appears to be on solid footing, with strong job growth. But warnings signs are mounting.

Is the US in recession? ›

According to the general definition—two consecutive quarters of negative gross domestic product (GDP)—the U.S. entered a recession in the summer of 2022.

Are they predicting a recession? ›

At the moment economists from the Federal National Mortgage Association, more commonly known as Fannie Mae, are predicting that a recession will start in early 2023. Their expectations are for total economic growth through 2022 to hit 0.1%, with this sliding to -0.4% over the course of 2023.

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