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Recession

 Fears of a recession, massive interest rate increases, and crippling inflation dominated news stories in the past year.

The stock market suffered greatly at this time, with the Nasdaq losing more than one-third of its value and the S&P 500 losing almost one-fifth of its value. By far, each of the three major US markets had its worst year since 2008.

However, now that 2022 has come to an end, there are some definite signs of economic improvement that raise the possibility that 2023 won't be the year the next recession starts.

Historic jobs recovery

Hiring remains surprisingly resilient. The economy added a robust 263,000 jobs in November, and the unemployment rate is just 3.7% — down dramatically from nearly 15% in the spring of 2020.

employee raise STOCK

Has your boss recently given you a nice raise so you'll stay? Are you an employer paying workers more not to quit?

This is just a touch above the half-century low that was tied earlier this year. Although major tech and media companies including Amazon, Twitter and Meta have laid off thousands of workers, initial jobless claims remain low. And new numbers published last week show first-time applications for unemployment benefits edged up to 225,000. That’s still low historically and almost exactly where jobless claims were a year ago, long before recession fears emerged.

“This is one reason to the be optimistic the economy could skirt a recession,” Moody’s Analytics chief economist Mark Zandi told CNN on Thursday. “Without mass layoffs, it’s unlikely consumers will stop spending and the economy suffer a downturn.”


Inflation is cooling

The cost of living is still way too high, but the rate of inflation appears to have peaked.

Consumer prices soared by 7.1% year-over-year in November. At almost any other point in the past 40 years, that would be alarmingly high. But this marked the fifth-straight month of improvement and a significant cooldown from 9.1% in June. It’s also the lowest annual inflation rate in nearly a year.

If this trend continues, it could significantly lower the risk of a recession. But if inflation remains well above the Federal Reserve’s 2% target, that would be problematic.



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