What is the Status of Recession in USA 2023?

Are you afraid of Recession in the USA in 2023?

Economic experts are once again sounding the alarm about an approaching economic downturn. 

They predict a forthcoming US recession in the second half of 2023, which is less than three weeks away.

Stay tuned with Blog with Trends to know about the status of Recession in USA 2023.

Take an Insight into the Economic Experts Saying about Recession in USA 2023?

1. A majority of economists forecast a recession for the U.S. in 2023 – 58 percent, according to a survey from the National Association for Business Economics (NABE) released earlier this week on March 27.

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2. According to The Conference Board, the probability that a recession will happen within the next 12 months is about 99%.

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3. Callie Cox, U.S. investment analyst at eToro, says investors should also take advantage of a potential recession in 2023 and prepare their portfolios for the light at the end of the tunnel in 2024 and beyond.

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4. A third of the economists who responded to the survey now expect a recession to begin in the April-June quarter. One-fifth think it will start in the July-September quarter.

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5.  In January, employers added more than a half-million jobs, and the unemployment rate reached 3.4%, the lowest level since 1969.

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6. Fed rate hikes went up to 4.5%-4.75% & the US GDP contacted by 0.9% in the second quarter of 2022 & 1.6% in the first quarter. This signaled that the economy might fall into the recession. 

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Quick Note

With inflation currently reaching its highest levels in 40 years, the Federal Reserve is taking proactive measures to raise interest rates in order to manage it. There is a belief that the United States may potentially face a Recession in USA 2023, if not already.

The U.S. economy is currently experiencing levels of inflation that have not been seen in 40 years.

What are the Reasons of Recession in the USA in 2023?

It is a must to know the reasons which are threatening the economy of the USA:-

1. Sparking Interest Rates

Economists have been observing since mid-2022 that the Federal Reserve’s interest rate increases could potentially trigger a recession if not managed cautiously.

According to a recent report by Forbes, almost all of the 54 surveyed countries are implementing similar measures to tighten their monetary policies. These adjustments may have broader consequences, potentially leading to a global recession.

2. Human Resource Layoff

Currently, the latest jobs report indicates that unemployment rates in the United States remain at a low level. 

However, prominent technology companies have already initiated workforce reductions. If this trend persists, there is a potential for an increase in unemployment, which further indicates the possibility of a recession.

Inflation and rising rates have not yet dragged the U.S. economy into the red. In addition to modest first-quarter GDP growth, the U.S. added 236,000 jobs in March, and the unemployment rate remains historically low at just 3.5%.

3. Increased Food Prices

The recent interest rate hikes in the United States have resulted in double-digit inflation, particularly impacting food prices. Additionally, the rise in fuel prices has contributed to increased transportation costs for food. As energy costs continue to rise globally, the issue of escalating food prices becomes widespread.

4. Impact of the Russia-UK War

The Russia-Ukraine conflict, along with supply chain issues caused by COVID-19, has created shortages and rising commodity prices.

In 2022, the average wheat price was 35% higher than in 2021.

5. A Tight-labour Market

Due to a shortage of workers and evolving workplace dynamics, the labor market has become increasingly tight. In order to attract and retain employees, businesses have been compelled to raise wages. However, this rise in labor costs has led businesses to adjust their prices, consequently contributing to the overall inflationary pressures.

6. Increased Energy Prices

There have been significant increases in energy prices driven by the Russia-Ukraine conflict & subsequent sanctions. Fuel oil prices increased by 65.7% in the 12 months to November 2022. 

Are There Positive Indicators for US Economy?

In the above sections, we have discussed about the backdrop of global Recession in USA 2023. 

Now, the good news is that U.S. Government is trying to effectively manage the situation. 

Their objective is to manage these dual challenges while avoiding a recession and achieving a desirable soft landing. Encouraging signs suggest that this goal is within reach, as inflation has shown a decline and the labor market remains robust. Despite some indications of decreasing real wages, household consumption has not yet experienced significant declines. 

However, the distinction between a soft landing and a recession is delicate. Consumer confidence is at historically low levels, and the wealthiest income brackets, which constitute a significant portion of consumption, are witnessing significant declines in real wages.

Assuming the best-case scenario, it is probable that the United States will experience a ‘soft landing’ characterized by modest and gradual growth throughout 2023, followed by an acceleration in 2024.

However, there is a significant possibility of a downside scenario where the U.S. economy could enter a prolonged recession, similar to the current forecasts for the United Kingdom and Germany, extending well into 2024.