As 2023 comes to a close, headlines questioning the strength of the economy in the new year have reappeared. It’s a yearly trend, and a tired one. As we all know, we cannot predict anything with certainty — and the economy is no different.
Instead of focusing on the future, let’s take a look back…
Most Wall Street experts spent the fall of 2022 anxiously bracing for an economic slump sometime in the following 12 months. Instead, they were blindsided by various markers of financial strength, such as historically low unemployment and solid corporate profits.
In fact, Bloomberg Economists projected last October that the odds of a recession in the next year were 100%. To be fair, the projection didn’t come totally out of nowhere…
- The Federal Reserve hiked interest rates seven times in 2022, and it planned to continue doing so, in its fight against 6.5% inflation levels.
- Borrowing costs were skyrocketing for the first time since before the 2008 financial crisis, threatening to hamper business investment and suppress consumer spending.
But, the recession never came.
The U.S. economy grew at an average annualized pace of 3.2% in the first three quarters of 2023, with another 1.3% projected for Q4. Inflation’s decline to 3.1% over the year in November and strong jobs numbers have made many experts — including Treasury Secretary Janet Yellen — optimistic that a “soft landing” is upon us. In short, inflation is cooling without the imminent threat of a recession.
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