The 2023 U.S. Economy- A Guessing Game

Throughout 2022, the U.S. economy experienced high inflation, economic expansion and contraction, low unemployment, and narrowly avoided a recession. But even economists with insight have mixed feelings about what the 2023 U.S. economy may be like- it’s a guessing game this early in the New Year.

The Federal Reserve has been working to slow the economy by raising interest rates seven times during 2022 to help cool down inflation. However, future interest rate increases in 2023 may catalyze a recession. Here’s what to watch over the next few months that may impact how the U.S. economy fares this year:

A potential Rise in Unemployment

Layoffs at employers like Amazon, Salesforce, and Meta (Facebook), are due to numerous factors such as over-hiring, personal and business spending declining, and the current economy. According to new research from Goldman Sachs, the U.S. Labor Department’s job openings report may need to capture the recent increase in layoffs. Interestingly, Goldman Sachs has also recently laid off workers.

Home Sales

Home sales declined 35% to 2020 levels before the housing market uptick during COVID-19. The rapidly soaring home prices have now leveled, a trend that economists anticipate will continue through 2023 and may resort back to a buyers’ market once again.

New Construction

Single-home construction declined every month during 2022, with building permits at a two-and-a-half-year low. Spring 2023’s Q2 home start data will indicate how new home construction may impact the economy as seasonal building slow-down once again picks up.

The Stock Market

The S&P lost 20% of its value in 2022, but the New Year’s optimism provided a short-lived rally in the first week of 2023. Closely watch for signs that The Fed may increase the Fed Funds rate creating a ripple effect in stock market performance.

Manufacturing

Manufacturing is declining as Americans spend less on items such as new cars, furniture, and appliances previously in demand early on during the pandemic, reflected in the Gross Domestic Product (GDP) score. The GDP measures the health of the U.S. economy quarterly.

While we have yet to determine how the U.S. economy will fare in 2023, right now is a great time to review your portfolio’s allocations and take appropriate actions for your situation. Contact our office today for a consultative meeting.

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