• Top economists see a painful credit squeeze and crash in the commercial real estate market.
• David Rosenberg predicted the US will tip into a recession by September.
• “A recession is a very big call because it’s a haircut to national income,” he said. 

It’s an uncertain time for the US economy.

GDP growth slowed more sharply than expected in the first quarter. More and more companies are announcing mass layoffs. Inflation has cooled by remains high, raising new questions about how high the Federal Reserve will lift rates.

Elsewhere, turmoil has slammed regional banks. Silicon Valley Bank collapsed last month, and First Republic Bank could be the next shoe to drop. 

The consensus view has zig zagged and now looks like less of a consensus. For what it’s worth, here’s what three top economists are saying about the US economy. 

David Rosenberg

The former chief North American economist at Merrill Lynch predicted the US will tip into a recession by September. He also sees a 20% downside in stocks and a damaging credit crunch.

On Blockworks’ On The Margin podcast this week, the founder and president of Rosenberg Research offered some other hot takes. 

• “I don’t think there are enough rate cuts priced in for next year. There’s a serious risk we’re going back down to the zero bound in a recession that ends up destroying demand and causing inflation to decline.”
• “A recession is a very big call because it’s a haircut to national income. It’s as if the whole country takes a pay cut. It’s not that we take the Lamborghini from 80 down to 20. It’s that we go in reverse.”
•  “It was like the Energizer Bunny — it gave us a little bit more juice. But to say that we’re not going to have a recession because of lagged impacts of fiscal stimulus from two years ago is ridiculous. The leading indicators are telling me that the recession is actually starting this quarter or next quarter. It’s certainly not a 2024 story.”

Jeremy Siegel

The Wharton professor said don’t be fooled by the current upbeat earnings season because the US economy is undergoing a credit crunch. “The impact is there, it’s just not in the data yet,” Siegel told CNBC of first-quarter financial results.

In a weekly note to clients, Siegel also added:

• “I still believe the cumulative effect of tightening rates and the banking reverberations will slow things down dramatically and make it hard for the stock market to break out from these high levels it has reached several times before.”
• “I remain uncharacteristically cautious until the Fed ‘gets it’ and not only pauses but says it is starting to look at rate cuts. I believe the real interest rate is too high to sustain normal growth at this point in the cycle.”

Mohamed El-Erian

The chief economic adviser at Allianz said large institutions like the Fed must adapt quickly on handling this unprecedented macro environment. 

The top economist broke down his outlook in a Financial Times column released on Friday.

• “Markets will punish companies and their managements if they do not adapt. Indeed, we are likely to see more financial stress and bankruptcies for businesses lacking resilience, as well as those with operating approaches that are not easily adaptable to a world of higher rates for longer. The latter includes commercial real estate whose moment of truth will materialise as more than $1tn of holdings need to be refinanced in the next 18 months.”
• “Without [adaptability], the steadying and guiding role of US institutional maturity will weaken even faster in the face of eroding credibility, turning this once dominant US comparative advantage into an even greater source of domestic and global instability.”