Many feared 2023 would be the year of recession. It turned out to be a year of remarkable resilience.
Inflation has cooled and the unemployment rate has now been under 4% for 22 months straight, the longest such stretch in over 50 years, according to the US Bureau of Labor Statistics (BLS). The country added more jobs than expected in November. Layoff rates are still hovering near historic lows. The Federal Reserve could deliver rate cuts as soon as March.
Wage increases have largely kept up with inflation but have surpassed it for lower-income workers. Real wages were up 0.8% year-over-year in November, which was most pronounced among lower-income Americans.
The much-discussed and feared recession hasn’t arrived.
Yes, inflation is up, but people have jobs and can keep spending. This holiday season, retail sales were up 3.1% during the holiday stretch from November 1 to December 24 according to MasterCard Spending Plus reports.
Things are not optimal for everyone. The economy has been very strong for people on the bottom and for entry-level workers and younger people, but a lot weaker for media, tech, and wealthier people.
Wage gaps still exist, people of color continue to be more unemployed than white Americans, and inflation has been eating into everyone’s budgets.
The housing market is weighing on many, especially renters in California cities — who are the ones experiencing the brunt of the rougher side of the economy.
There is the very real sticker shock from inflation, up 3.1% year-over-year in November but down from January highs of 6.3%.
Forecasters expect somewhat slower growth and lower inflation. Both inflation and interest rates are expected to moderate this coming year. The Federal Reserve has signaled that it’s probably done raising interest rates and will likely start cutting rates in 2024.
So, like for most things, how you feel about the economy will depend greatly on the view from where you sit.
