What’s Really Happening to the Economy in 2023?

A look at what’s really happening to the economy in 2023 and how we can decode some of the mixed signals we’re getting from the markets.

We’re halfway through 2023 and it’s been a rollercoaster year with three bank failures and a near-debt-line catastrophe. The economy has been confusing all along. Surprisingly, the stock market has been fairly stable. Inflation is still not where we want it to be, but as we get closer, the unemployment rate is low, the labor market is strong, and yet it seems like there’s a new round of mass layoffs every few weeks. The ever-looming recession is still mentioned, but always seems to be sometime in the future.

Some leading economists recently told CNN that they think we may see a recession at some point, but we always see a recession. . . ultimately. It was all a lot to deal with. So if you don’t know what to think of this, you’re not alone.

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Sometimes when the details are overwhelming, it’s good to take a step back, and there’s no one better to do that with than Catherine Rampell, a data-driven journalist for CNN, the PBS News Hour, and The Washington Post. In May, Rampell wrote an article entitled “What the heck is wrong with the US economy?” So we asked her.

Rampell believes the economy is doing mostly well and the indicators, especially on the job market, are good. Inflation is still a disappointment and is well above the Fed’s target. “Although prices have come down significantly, prices are still rising faster than we would like,” she says.

But consumers are genuinely grumpy in a way that’s puzzling to many people given the overall strength of the economy. Rampell says there’s a lot of debate as to why, but she’s looking for answers rather than simply dismissing the sentiment or blaming it on consumers being brainwashed by pessimistic media or listening to Republicans claiming the strengths downplay the economy.

Rampell believes there are other reasons as well: “If you look at the dollars going into people’s bank accounts versus the dollars going out because of higher prices, especially at the bottom of the income distribution, people don’t have those ahead. Earnings are not keeping up, especially at the lower end of the income distribution.

“Also, at the beginning of the pandemic, there was a lot of government support – for example an extended child tax credit,” she adds. They had several rounds of stimulus checks. They had more generous food aid and unemployment insurance. For many people, this influx of money enabled better living standards than before the pandemic.”

Add to that the fact that most Americans don’t travel or eat out much due to COVID, and Rampell says that “people had a lot of money in their bank accounts and they were mostly spending it on things and not experiences.”

When the stimulus payments stopped, people in the lower tiers were economically where they were before the pandemic, but they were worse off than they were a year ago, so logically they feel worse off. All that money being pumped into the system also resulted in a surge in purchases, raising the prices they were now struggling with, with no excess money to fill the gap.

““With prices going up and a lot of these measures that I just talked about coming to an end,” Rampell says, “people have used up their savings and they feel like they’re behind.” They’re struggling to maintain their standard of living during the pandemic or to be maintained before the pandemic.

“Yes, there are a lot of jobs,” adds Rampell, “but you only have a limited number of hours in the day” to do those extra jobs. And for many people, that’s just not practical or possible.”

What about the “R” word?

Rampell’s assessment of a recession has weakened. A few months ago she was very pessimistic due to rising interest rates and risky debt limits. “If Congress had decided not to pay our debts,” she says, “it would probably have triggered a global financial crisis and a lot of really bad things would have happened in the economy just caused by government malfunctions.” Luckily, it could be resolved so that the biggest cause of concern for me is gone.”

And the number of jobs continues to exceed expectations. “Forecasters are usually wrong,” she says. “It’s not unusual. It is very difficult to get the correct numbers precisely. The strange thing is that they always went wrong in the same direction. You always underestimated the strength of the labor market.”

“I’m not an economist,” says Rampell, “I’m a business journalist. But if the economists get it wrong month after month, we may have underestimated the strength of this job market and this economy, and a recession is nowhere in sight.”

The paradox of thrift

When it comes to where to put your money when the economy is in this tough spot, Rampell is honest enough not to offer any bold advice. “It’s not like there’s a clear financial strategy that follows from these conditions we’re dealing with, also because the types of things you might invest in when we’re in a recession tend to be a little different than that Type of things you could invest in things you could invest in when we have high inflation because one implies falling interest rates and the other implies rising interest rates. So what do you do when you have both? This is the problem the Federal Reserve is addressing. They are concerned about a flagging economy And They are worried about high price growth.”

And these policies have an impact on consumers. Rampell says when friends ask her about making big purchases now, her advice is simple. If you have to do it, then do it. If you don’t have to wait, then wait—if the economy slows, interest rates will fall.

“For For individuals, it’s probably a good thing if they don’t splurge on loads of luxuries,” she says. “But there’s this kind of paradox — it’s called the thrift paradox — that if everyone saves at the same time, it can cause or contribute to a recession.”

Artificial Intelligence and the Labor Market

Obviously, there’s a lot of uncertainty about where different industries or jobs are headed, Rampell says, but the U.S. Bureau of Labor Statistics regularly releases forecasts of which types of jobs it thinks will see more or less growth.

“I believe that one of the professions that is projected to see fairly strong growth in the coming years is that of wind turbine technician, especially given the advances in renewable energy technology and changing policies. The same is true for many healthcare professions. This is not about technological change, but about how the economy has developed, how our country’s demographics have developed as we got older.”

“We don’t know exactly how something like AI will ultimately impact the work landscape,” Rampell continues. “In the course of human history, there have always been disruptive technologies that have driven many people away. Whether it’s the invention of the automobile, the replacement of the whip driver or automated looms replacing hand weaving. Some people always get hurt more than others, but new opportunities arise practically every time.

“It’s about thinking strategically,” she says. “What does the economy need and what does the country need? What can man do that technology cannot?”

women in the workforce

Rampell says the pandemic has been a bad time for women in the workforce due to a combination of childcare, disruptions, school closures, and the fact that women are more likely to work in industries that have been affected by the pandemic, such as food services, hospitality, etc . and healthcare.

“During the pandemic,” she says, “women dropped out of the labor market and were laid off in large numbers.” There were fears that the pandemic would have a long-term negative impact on women workers — that they would not just lose their jobs at this point but that we would see a decline in women’s employment for a very long time. In fact, the opposite has happened. A record proportion of women have jobs, possibly due to the increasing availability of remote work. But women seem to have come out of it collectively stronger than ever, and I think that’s worth celebrating.”

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